Prosus scraps $4.7 bn deal to buy Temasek, GA, TA-backed BillDesk

Prosus, the global consumer internet group spun out of South Africa’s Naspers, said Monday its payments arm PayU has terminated the deal to acquire Indian digital payments provider BillDesk for $4.7 billion (Rs 34,500 crore then) struck a year ago.

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 September 5, 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,” said Prosus.

The company did not clarify what the other conditions were.

It added that Prosus has been a long-term investor and operator in India — investing close to $6 billion in Indian technology companies since 2005 — and that it remains committed to the Indian market and growing its existing businesses within the region.

The proposed deal was the second-largest M&A in the Indian tech ecosystem, only behind Walmart’s acquisition of a majority stake in Flipkart three years ago for $16 billion.

The all-cash transaction was on a cash-free, debt-free basis. It came over three years after talks between the two companies were first reported. A mismatch over valuation pushed the deal talks. Notably, at that time the proposed deal was at one-third the price that PayU finally decided to pay for the company.

Interestingly, valuations in the tech sector have corrected sharply over the last one year. Paytm, one of the prominent fintech companies, saw a major erosion of shareholder wealth as its share price crashed after it went public. It is not clear if BillDesk failed to keep up with its growth projections.

PayU had said last year that the proposed acquisition will make the company—the payments and fintech business of Prosus which operates in more than 20 high-growth markets—one of the leading online payment providers globally by total payment volume (TPV).

PayU operates across three distinct businesses: payments for domestic and cross-border transactions; credit solutions for consumers and small businesses; and strategic investments in fintech companies including Remitly in the US. Its domestic payments and cross-border transactions vertical reported the TPV rising 51% to $55 billion across India, Latin America, Europe, the Middle East and Africa for the year ended March 2021.

The transaction was to build on previous acquisitions by PayU in India, including CitrusPay, Paysense and Wibmo.

Prosus counts in its global portfolio companies such as Tencent, Brainly, Byju’s, Eruditus, LazyPay, Meesho, Movile, OLX, PayU, Remitly, SimilarWeb, Shipper, Skillsoft, Swiggy, Udemy, Mail.ru, Trip.com and DeliveryHero.

BillDesk, investors

BillDesk was founded in 2002 by accounting firm Arthur Andersen’s former employees Srinivasu, Ajay Kaushal and Karthik Ganapathy. The company provides electronic transaction processing services to banks, e-commerce companies, telecom operators and state utilities.

It competes with billing aggregators such as RazorPay and is backed by, among others, General Atlantic, TA Associates, Clearstone Venture Partners and Singapore state investment firm Temasek.

Clearstone and TA Associates were among the early set of investors and are believed to have partially exited in the past. General Atlantic and Temasek had come in around six years ago and had picked up a stake at a valuation of around $600 million. While the early investors were looking to harvest high returns, even the late-stage PE backers were set to pocket around eight-fold returns in the exit, implying an internal rate of return of more than 50%.

The value of the net assets under BillDesk as of March 31, 2021, was Rs 1,888.1 crore ($256.9 million). The unaudited profit after tax attributable to the net assets for 2020-21 was Rs 270.6 crore ($36.8 million), translating into an embedded valuation of 128 times its last year’s profit. BillDesk was one of the early tech startups to start generating profits several years ago.