In signs of consolidation for the online payments and the Fin-tech niche, Nasper backed payments service PayU is acquiring Mumbai based Citrus Pay for a sum of $130 million. The deal is one of the largest to have ever occurred in the niche.
The sum, which translates into around 865 crores, is part of what is shaping up to be one of the biggest deals in India’s Fin-Tech history. It is particularly significant because the acquisition will give birth to a entity that will be able to take upon any competitor in the niche — including the likes of Paytm, Freecharge and Mobikwik.
The deal is expected to be announced today. Meanwhile, the deal, which is expected to close by the year end will also be making Citrus Pay investors pretty happy. The $130 million sum that is going into making the acquisition will also provide good ROIs to the VC firms that havd been backing the company since the past five years.
For example, Sequoia Capital, one of the first and foremost supporters of Citrus Pay, had invested about $10 million for a 32% stake in the venture. The firm is expected to receive a four-fold return on its investment. On the other hand Ascent Capital — another firm which purchased a 8% stake last year — has earned about $12 million, according to various sources.
This is not the first time that venture firms have made money betting on Indian starups. And indeed, Sequoia and Ascent are major players with their fingers on a lot of pies. However, considering the slowdown in the industry, the ROI is bound to come as pleasant news.
As per Laurent le Moal, Chief Executive Officer of PayU,
The agreement enables PayU to quickly bring additional innovative financial services to market for its business and consumer customers.
He also said that the acquisition would prove to be a significant milestone for both businesses and the fintech industry in India.
The new entity is forecasted to be handling 150 million transactions by 2016. The transactions are estimated to be worth a combined $4.2 billion. The growth curve is also pretty strong and the companies are exhibited to together have a growth rate of over 50% annually.
The companies will be catering to a total of 20 million customers and over 2 lakh merchants, once the consolidation process completes. The merging of the two entities is expected to take place in around 6 months.
As far as the management of the merged entities is concerned, Citrus Pay MD Amrish Rau will take charge of the merged entity and will report to PayU Chief Executive Officer le Moal.
There has been a significant division of responsibilities as well as the different Co-founders of the company set out to tackle new and emerging areas. While Jitendra Gupta is expected to take the reins of Lazypay — which is Citrus Pay’s attempt into credit — Shailaz Nag, PayU co-founder, will focus on new areas of growth through new bank alliances.
Meanwhile, Co-founder Nitin Gupta will be leaving the company to pursue his personal entrepreneurial ambitions — not before the transition is completed though.
South Africa-based Naspers will also be invest a $30 million-$40 million Citrus Pay over the next few months, which should provide a further boost to the already growing industry. There is a lot of scope in the field now, thanks to enhanced smart-phone usage and the government’s increasingly progressive policies. Citrus Pay is one of the most forward looking companies in the niche with innovative technologies, and with PayU on it’s side, pundits are expecting good results.