More major consolidation underway in the world of payments: Prosus -- the Dutch tech giant that bundles together Naspers' fintech, e-commerce and other international investments and businesses outside of South Africa (including a big stake in Tencent) -- today announced that it would pay $4.7 billion to acquire BillDesk, a payments provider based in India. Prosus plans to combine BillDesk with PayU, its existing global fintech and payments business, which already has a strong presence in India. The deal has been rumored to be in the works since about July.
The proposed acquisition will make PayU one of the bigger online payment providers globally with some $147 billion in payment volume annually. But the proposed all-cash deal is not only a significant consolidation move in the world of payments: it also underscores Prosus' continuing focus on developing markets and specifically India. Prosus said that the deal -- one of the biggest ever made by Prosus, and one of the biggest M&A moves in India -- will give its fintech holdings in India a cumulative investment value of over $10 billion.
That is part of a long-term strategy for Prosus (and Naspers) that stretches back nearly a decade involving a number of other acquisitions and investments in startups -- including DotPe and Indiagold -- in the region.
The proposed acquisition will require approval from the Indian regulator Competition Commission of India. In a call with reporters Tuesday, Prosus and PayU executives said they don't expect much hurdle in receiving the approval as PayU and BillDesk offer complementary businesses. BillDesk's network is used by India's largest banks and by a large number of merchants across utilities, telecom, insurance, mutual funds, travel and e-commerce verticals.
“Payments and fintech is a core segment for Prosus and India remains our number one investment destination," said Bob van Dijk, group CEO of Prosus, in a statement. PayU -- formed out a combination of various interests in fintech and payments that Naspers (and then Prosus) had acquired over several years, is currently active in some 20 markets.
India represents a huge market for financial services, with a digitally savvy consumer base with a rapidly expanding middle class with disposable income.
Within that, PayU has positioned itself as a strong player. Specifically, it has been highly competitive in the Indian online merchant acquiring market — both on price and in-field sales effort. PayU India has a dominant share in the payments gateway business where it traditionally competed with BillDesk and CCAvenue (owned in part by Infibeam) -- and of lately, Sequoia Capital India-backed RazorPay.
BillDesk has been around since 2000 and its investors had included Visa, General Atlantic and the State Bank of India. PitchBook estimated that its valuation was around $1.53 billion in 2019 when it last raised money. Tracxn estimated that the founders still owned just under 30% of the company ahead of this acquisition.
BillDesk, already a big contractor for several government departments, is among the firms that has applied for the license of NUE, a new retail payments networks proposed for India that is expected to compete with established UPI railroads. BillDesk has teamed with Amazon, ICICI Bank, Axis Bank, Pine Labs and Visa for the license.
Anirban Mukherjee, CEO of PayU India, suggested on a call today that Prosus may explore expanding BillDesk's business outside of the world's second-most populous nation -- though a concrete decision hasn't been made, he cautioned.
“We believe this transaction will stimulate both innovation and competition within India’s digital payments industry," said Laurent Le Moal, CEO of PayU, in a statement. "This will not only help to strengthen India’s digital economy, but also bring financial services to those who may have historically been excluded. This ambition is fully aligned with the Government of India’s vision of ‘Digital India’ and is a key objective for PayU across all the communities we serve globally."
PayU today said that its domestic and cross-border payments business as of March 2021 was up 51% year on year across its operations in India, Latin America and EMEA, a mark of the overall boom that we have seen in the global digital payments market in the wake of the COVID-19 pandemic.
Other businesses PayU operates include credit solutions across India and five other markets. Prosus itself is also an active investor, with stakes in remittance company Remitly and others -- representing a pipeline for strategic partnerships, but also potentially future acquisitions.