acquired by global technology investor Prosus in a $4.7 billion deal, one of the largest such transactions in the digital economy. Srinivasu spoke to ET’s Ashwin Manikandan & Digbijay Mishra about the deal and the roadmap ahead soon after it was announced on Tuesday. Edited excerpts.
BillDesk has been in talks with potential suitors including PayPal, American Express and PayU in the past. What made you say yes to Prosus?
(Laughs) Most of those were speculative reports. This is the first time that we engaged with anyone on a transaction after our last funding round in 2018/19. A lot of things led to this, not just one factor. It has come at a time when we reached a level of whether to do an IPO or look for the next stage of growth. We coupled that with the way the Indian digital payments market is changing, and a larger-scale platform naturally starts winning more. We have seen it in the past. We are a fairly large player, and this transaction just accelerates what can be done on the platform. It also brings to the table an enormously large and well-respected tech investor like Prosus. It provides the business access to a large pool of strategic capital that can be relied upon to grow the platform and services robustly in a rapidly growing digital payments market like India.
Will the founders stay on once the deal closes?
Absolutely. This deal is subject to regulatory approval. Once those clearances are in place, we will see how best to quickly leverage the strengths and offerings of both the BillDesk and PayU platforms to deliver the needs of merchants and banking partners. For us, it is about scaling faster. Founders will stay on to build the right platform for growth. We are excited about what we can do at that scale…
Besides the Competition Commission of India, will you need Reserve Bank of India approval?
We are a licensed player under the Payments and Settlement Systems Act. Those licenses carry appropriate terms and requirements in the context of a transaction like this. We will need to follow that. But beyond looking at the license terms, we will do everything needed to assure that the transaction will work well for the ecosystem and further the digital payments focus and agenda of both the RBI as well as the government. What the deal reflects is that India is such a large opportunity pool for transactions.
Is there a rough timeline by when you expect the regulatory approvals to come through?
The process of approvals follows a well-established routine, and I am hopeful that the necessary regulatory approvals will come over the next four to five months.
Will BillDesk continue to remain an independent entity? How will you draw synergies with PayU?
This is an investment transaction, not a merger transaction. Till such time regulators approve the deal, we will both continue to operate exactly as we do today and independently. Post-approvals, we will explore what’s the best possible way to grow, given the possible synergies.
Prosus and PayU are more than just payment processors. They have forayed into financial services and even wealth management businesses in India. How does that play out for you?
From our perspective, there is a way (in which) we have built the business. Now, we have an opportunity with a strategic partner which has financial backing. Rarely do you get that combination. We are at over $90 billion in annual transaction volumes. When you add that to the PayU volumes, we are creating a scale that helps devise and build products and service offerings for the diverse merchants we cater to. We expect synergies out of such a combination. Since we have a larger team and resources, we can also accelerate some of our product innovations. It will be the same thing from their perspective.
Are there any equity incentives for founders as part of the deal?
It is a simple, all-cash deal in the sense that 100% of BillDesk, including the equity held by founders, is being acquired. Thereafter, any other programme or equity incentive will be part of the regular incentive programme that would typically operate as part of the standard organization-employee engagement processes.
How has your journey been as an entrepreneur – building the business from scratch – over the last 20 years?
It has been a long journey, but a very fulfilling one. We are all as passionate about it today as we were 20 years ago. We started the business at a time when the term ‘fintech’ itself wasn’t in vogue. Internet access was limited to a very small set of Indians. Given our consulting, technology and financial services backgrounds prior to BillDesk, we had a view of how markets in India would likely evolve with respect to electronic payments. From there on, we simply worked hard towards that vision. It has been an extremely interesting journey – the first capital we raised was roughly a quarter of a million dollars in today’s terms. Large capital was initially hard to come by. What it helped do was to focus sharply on fundamental drivers of value, and by the end of the first phase of growth, we were profitable. In a sense, this entire business has been built on a capital of not more than $5-$7 million, and after that we have always been a cash generator. In the second phase, multiple other players entered the market with different models. Many of them fell by the wayside. Our model has always been to build a sustainable business. Bill payments are now regulated, but when we started offering these services 20 years ago, our focus was to offer it in a model that was beneficial to all partners. The customers, the merchants, the utilities and banks – all our partners benefited from our model… Over the last 5-7 years, with a strong national focus on digitization and on the back some robust digital payments frameworks put in place by the RBI, it has been a period of hyper growth.