One of the largest acquisitions in the internet-based solutions segment may be on the cards, as fintech start-up PayU, backed by one of the world’s top technology investors, Naspers, is in talks to acquire BillDesk, the popular payments gateway major for an amount that could fall between $3-4 billion.
The news was uncovered by Business Standard in a report.
If the talks go through and PayU successfully completes the acquisition, it will mark the second-largest Indian internet-based acquisition to date, after the buyout of Flipkart by Walmart for $16 billion. It would also mark the exit of BillDesk’s founders and private equity investors Temasek and General Atlantic from the firm.
BillDesk has been open to being acquired for quite some time, and while talks of PayU buying a 100% stake in the payments gateway major had fallen through in the past due to high valuations, it would benefit PayU immensely if it succeeds in its current endeavor, enabling it to capture the entire end-to-end payments ecosystem.
The 21-year-old BillDesk, founded by ex-Arthur Andersen executives M N Srinivasu, Ajay Kaushal, and Karthik Ganapathy, remains one of the few internet companies in India to actually profit. It is backed by Visa, TA Associates, General Atlantic, venture capital firm Clearstone Venture, and Singapore’s state-held investor Temasek Holdings. It has emerged as one of the leaders in its segment and today handles 50-60% of billing transactions in India. It claims that its versatile range of technology, payments services, and extensive processing network are used by India’s largest banks and many of India’s organizations across diverse industry segments such as telecom, insurance, utilities, financial services, education, entertainment, and e-commerce businesses.
As for the 15-year-old PayU, whose parent company is Naspers, the firm is known for providing payment technology to online merchants. It has grown much in recent times (mainly through acquisitions),
PayU is not the only fintech start-up to treating BillDesk as an opportunity, as media reports have suggested that fellow fintech giant Paytm is eyeing BillDesk as well. The payments gateway’s journey in the government segment is the strongest and combined with an enviable technology back-end, the firm that manages to acquire it would get access to good business.
With the Indian payment gateway market growing rapidly (accelerated by the shift to online services owing to the pandemic) and expected to register a compound annual growth rate (CAGR) of 15% over 2020-25, the time is ripe for fintech start-ups to seize the opportunity.