Prosus pushes hard on Indian fintech door

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A person speaks on a phone in Mumbai, India, February 16, 2017. REUTERS/Danish Siddiqui

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MUMBAI, Aug 31 (Reuters Breakingviews) - Prosus (PRX.AS) is pushing hard into India’s red-hot financial technology market. The Dutch tech investor announced on Tuesday that it’s paying $4.7 billion for BillDesk. Adding the subcontinental business dramatically enlarges the buyer’s existing PayU payment processing business and provides a profitable base to extend more credit. Given the growth on offer, the deal is not too pricey.

BillDesk operates mostly behind the scenes in India’s fiercely competitive payments scene. Consumer-facing apps from Google’s G-Pay and Walmart’s (WMT.N) PhonePe facilitate huge but free peer-to-peer money transfers. But there’s little money to be made in riding on the country’s open-access digital payments infrastructure, which processed transfers worth over $562 billion last year. Relationships with merchants are far more lucrative.

Payment gateways like PayU and BillDesk provide services to companies including e-commerce giants (AMZN.O) and Walmart’s Flipkart, enabling the merchants to accept different types of payments on their websites. Focusing on businesses rather than consumers means lower marketing costs and fatter margins.

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The acquisition will almost triple the total value of payments handled by PayU to $147 billion. BillDesk’s size and stronger focus on large merchants will also help PayU’s micro-lending business reach new potential users for its “buy-now-pay-later” service. Like other fintechs, PayU uses payments data to help it assess the risk a loan will not be repaid.

The deal values BillDesk at 19 times adjusted revenue in the year to March. That looks punchy next to $339 billion payments behemoth PayPal (PYPL.O), which trades on 13 times, but is a lot lower than $99 billion Dutch processor Adyen (ADYEN.AS), which is valued at 90 times revenue. India’s fintech super-app Paytm, which offers its own payments gateway, remains in a different league: the company’s mooted $25 billion valuation in its planned initial public offering is equivalent to 57 times revenue.

The transaction is another sign of Prosus Chief Executive Bob van Dijk’s determination to recycle cash from the gradual whittling-down of its 28.9% stake in Chinese internet giant Tencent (0700.HK), currently worth more than $170 billion, rather than simply handing it back to shareholders. After paying for BillDesk and another 2.5% stake in Delivery Hero (DHER.DE), the Dutchman will have $11 billion left in his war chest. India is a large emerging market that is relatively open to investors like Prosus. Van Dijk may need to dip into that pot again to keep up.

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- Prosus said on Aug. 31 that it had agreed to buy Indian payments processing network BillDesk for $4.7 billion, making the Amsterdam-listed technology investor one of the biggest players in the country’s fast-growing financial technology sector.

- Prosus, which is majority-owned by South Africa’s Naspers, said BillDesk would complement its existing PayU business, which operates in India, Latin America and Europe.

- BillDesk processed transactions worth $92 billion in the year to the end of March 2021, according to a Prosus investor presentation. Its revenue for the period was $253 million and EBITDA was $43 million.

- Prosus shares were up 4.2% at 73.40 euros by 0837 GMT on Aug. 31.

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Column by Una Galani in Mumbai and Ed Cropley in London. Editing by Peter Thal Larsen and Oliver Taslic

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