PayU has cancelled its $4.7 billion acquisition of BillDesk

The $4.7 billion acquisition of BillDesk by PayU, a unit of Prosus NV, was supposed to be one of the biggest deals in India in the fintech space. Not it looks like the deal is not happening. As per a statement issued by Prosus NV (the owner of PayU), they had terminated the $4.7-billion deal to acquire Indian payments firm BillDesk. The reason proffered is that certain pre-conditions had to be met by the September 2022 deadline, which was not done. That had resulted in Prosus calling off the deal. If it had happened it would have been the second largest internet deal in India after the $16 billion that Walmart paid for Flipkart in 2018.

Prosus NV is a Netherlands  based ecommerce company which has aggressive plans for the Indian digital and the deal to buy out BillDesk through PayU was part of the larger plan to have a larger say in the Indian digital and fintech market. It had been announced in August 2021 as an all-cash deal. Incidentally, the deal is already approved by the Competition Commission of India (CCI). However, the approval of RBI is still pending. However, Prosus has not confirmed as to which conditions were not met by BillDesk, which had resulted in the deal being called off by Prosus.

The merger of BillDesk and PayU would have been huge in the sense that it would have created a digital payments giant with annual total payment volume (TPV) of $147 billion. If you look at competitors, then Razorpay has a comparable TPV of $65 billion while CC-Avenue (part of Infibeam) has estimated TPV of $20 million. The combine would have commanded close to 40% of the payments market in India. Currently, Prosus serves more than 450,000 merchants via more than 100 payment methods. Incidentally, India is not a new market for Prosus, as they have already invested in Swiggy and PharmEasy.

BillDesk was founded by 3 former Arthur Andersen consultants viz. M N Srinivasu, Ajay Kaushal and Karthik Ganapathy in the year 2000. The company had benefited substantially from a surge in digital payments and the proliferation of smartphone adoption combined with easy and robust Internet access had only added to the growth. The 3 promoters were slated to get about $500 million each from the deal. Today, BillDesk is predominantly owned by General Atlantic Partners, with 14.2% stake. BillDesk has the largest list of business clients among the various payment gateways in India.

BillDesk provides a complete suite of solutions ranging from settlements, collections, reconciliation as also auto settlements. It also partners in categories such as billing, utility payments, direct-to-consumer procurement, government payments and also financial services. Among the major shareholders, the 3 promoter shareholders jointly own close to 30% stake in the company. While General Atlantic Partners holds 14.2%, other major shareholders in BillDesk include TA Associates which holds a 13.1% stake and Visa which holds a 12.6% stake in BillDesk. 

Prosus has confirmed that there is no termination fees clause, which essentially means that Prosus can just walk away from the deal for free. However, the promoters and the large shareholders of BillDesk are far from amused since their IPO plans too had been contingent on this deal.