Dutch consumer internet conglomerate Prosus NV, the parent of fintech company PayU India, said Monday it has terminated the agreement to acquire Mumbai-based payment aggregator BillDesk. The $4.7-billion deal, announced last August, would have become the biggest fintech M&A deal in India if it had gone through, and proposed to merge BillDesk with PayU India.
Notably, the companies had received the CCI’s nod only last month. However, certain approvals, including that of the RBI, were still pending.
“Closing of the transaction was subject to the fulfilment of various conditions precedent, including approval by the Competition Commission of India (CCI). PayU secured CCI approval on 5 September 2022. However, certain conditions precedent were not fulfilled by the 30 September 2022 long stop date, and the agreement has terminated automatically in accordance with its terms and, accordingly, the proposed transaction will not be implemented,” Prosus said in a statement.
“Prosus has been a long-term investor and operator in India — investing close to US$6 billion in Indian technology companies since 2005. Prosus remains committed to the Indian market and growing its existing businesses within the region,” it added.
The company did not detail the unfulfilled conditions that led to the deal’s termination. Asked about the conditions, a Prosus spokesperson wrote in an e-mail, “I’m afraid there is nothing more that we can say beyond what is in the statement.” The Indian Express reached out to BillDesk co-founder MN Srinivasu but he did not respond.
According to sources, certain investors of BillDesk are exploring options to consider a legal recourse against the deal being terminated by Prosus. “There are concerns over confidential BillDesk data that has been shared with PayU over the last year in anticipation of the acquisition,” one of the sources said.
The all-cash deal was expected to provide an exit to BillDesk’s institutional investors — General Atlantic, Temasek Holdings, Visa, TA Associates, March Capital, and Clearstone Venture Partners — in addition to the three co-founders, who together held 29.6 per cent share in the company.
Another source said the decision to terminate the deal was ratified by Prosus’ board of directors and it was “a final decision”, indicating that the company does not plan to pursue the deal under a new agreement.
On September 5, following the CCI approval, PayU India had said that the transaction involved “novel assessment by the CCI of dynamic digital markets”. “Prosus firmly believes that this acquisition of BillDesk will have significant pro-competitive benefits for the Indian economy and will strengthen the Indian digital payments market, which is fully regulated by the Reserve Bank of India (RBI). This acquisition by PayU of BillDesk is also consistent with the government of India’s Digital India mission and will benefit Indian merchants, government institutions and consumers,” PayU India CEO Anirban Mukherjee had said.
Founded in 2000 by former consultants MN Srinivasu, Ajay Kaushal and Karthik Ganpathy, BillDesk is among India’s largest payment gateway aggregators, handling more than half of all online billing transactions, according to industry estimates.
Prior to the acquisition announcement last year by Prosus, BillDesk had also been in talks with other fintech giants for a takeover, including Paytm.
Payment aggregators like BillDesk essentially bring together various payment systems such as credit or debit cards, netbanking, UPI, and wallets on a single platform for online merchants to offer to customers.
According to industry estimates, BillDesk and Paytm together controlled a massive chunk of India’s payment gateway traffic. However, investors of BillDesk had been looking for an exit in the face of rising competition from, besides Paytm, a host of players including Infibeam, CCAvenue, PayU, and Razorpay. For the year ending March 2021, the company reported a net profit of Rs 271 crore, or around $37 million, making it a prime target for other payments businesses looking to grow inorganically.
PayU is present in several payment segments — gateways, wallet, credit services — and even in the non-banking financial company (NBFC) space. Along the way, it has acquired or invested in several fintech start-ups, including CitrusPay, ZestMoney, PaySense, and Wibmo.
According to Prosus, which is a division of the South African multinational Naspers, the acquisition of BillDesk was to give a huge leg-up to PayU in India, with the post-deal group entity handling four billion transactions annually — four times PayU’s current level in India.