Amsterdam-listed Prosus, which is owned by South African holding company Naspers Ltd, said its payments and fintech subsidiary PayU will pay 345 billion rupees, the equivalent of $4.72 billion, in a full-cash deal for BillDesk. Shares of Prosus rose 5% on Tuesday following the announcement.
The acquisition will bring Prosus’ cumulative investment in Indian technology since 2005 to more than $10 billion, as the company seeks to profit from the world’s fastest-growing major economy before the coronavirus pandemic.
BillDesk, which currently competes with Prosus’ PayU in India, allows its customers to collect invoices and organize, pay and manage their bills all in one place. Founded in 2000, it made after-tax profit of $36.8 million in the year ended March, while the value of its net assets was approximately $256.9 million, primarily in cash and cash equivalents.
“It is good to back a local player with a long history in the market. This transaction sounds positive, but is expensive,” said Nilash Hansji, portfolio manager at Old Mutual Equities in Cape Town, South Africa.
Executives said the hefty price tag was justified because of the scalability of the combined businesses.
“Scale is a big reason for doing this transaction,” Bob van Dijk, chief executive of Naspers and Prosus, said in an interview with The Wall Street Journal. He said the combined company would be among the top 10 payment processors in the world.
Digital retail payments are growing rapidly in India, an economy of over 1.3 billion people that the International Monetary Fund expects to expand by 9.5% this year. The growth in online payments has been boosted by the pandemic, as shoppers around the world avoided stores and turned to the Internet to shop instead.
Affordable handsets and cheap data have also accelerated online payments in India, Mr. van Dijk said.
“The rapid adoption of online payments is the driving force behind this acquisition,” he said.
Prosus said the proposed acquisition of BillDesk would bring PayU’s total payment volume to about $147 billion annually. In the 12 months ending March 2021, PayU, which operates in more than 50 markets, grew its total payment volume by 51% to $55 billion in India, Latin America, Europe, the Middle East and Africa.
The fintech sector in particular has seen a boom. In June, Sweden’s buy-now-pay-later payments specialist Klarna Bank AB said it had received $639 million in a new funding round led by SoftBank Group Corp.’s Vision Fund 2, valuing the company at $45.6 billion. Its valuation has increased more than eight-fold since 2019. In March, fintech company Stripe Inc. raised $600 million, valued at $95 billion.
One of Europe’s most valuable tech companies, Prosus is best known as the largest shareholder in Chinese Internet and videogaming giant Tencent Holdings Ltd. Prosus has been hungry for a deal since it sold $14.6 billion worth of shares in the Chinese internet giant in April. . The sell-off for the second time in three years reduced its stake in Tencent to 29%, which is currently valued at about $170 billion.
Van Dijk said profits from the Tencent stock sale will be used to fund and expand the company’s online classifieds, payments, food-delivery, retail and education businesses, and fund mergers and acquisitions.
In August, Prosus finalized its $1.8 billion acquisition of Stack Overflow, an online community for software developers.
In 2019, Naspers created Prosus to hold a stake in its international asset—Tencent, as well as investments in tech companies such as Russian social-media operator Mail.ru Group Ltd., German food-delivery business Delivery Hero, and US online marketplace Letgo .
This story has been published without modification to the text from a wire agency feed
Don’t miss a story! Stay connected and informed with Mint.
download
Our App Now!!
.