One of the world’s largest technology investors just pulled off one of the largest upsets in India’s tech industry.
Last week, Prosus, the Dutch unit of South African tech company Naspers, scrapped what would have been a landmark fintech deal in India—13 months after signing the agreement. In August 2021, the $112-billion behemoth said it would pay $4.7 billion in cash to buy India’s largest payments company, BillDesk, and merge it with its payments arm, PayU.
Though speculation is rife that Prosus walked out of the deal over the price price The Economic Times Transaction declined: why Prosus scrapped the $4.7 billion PayU-BillDesk deal Read more , people close to both Prosus and BillDesk told The Ken that there were no renegotiations on the price at any stage after the deal was struck. Instead, a combination of factors, including Prosus’ unwillingness to wait for the Reserve Bank of India’s (RBI’s) approval, concerns about BillDesk’s performance, and worsening economic conditions, led to this outcome.
BillDesk—co-founded by MN Srinivasu, Ajay Kaushal, and Karthik Ganapathy in 2000—is India’s only profitable payments company. It processes nearly $100 billion in online retail payment volumes, in a year, with over a 50% market share in bill payments.
After the merger, the eight-year-old PayU, valued at about $1.5 billion, would have become the largest payments company in the country. It stood to process about $150 billion in transaction value, controlling half of online retail payments.
But on 30 September, the deadline for the merger to be completed, Prosus emailed BillDesk’s shareholders to say that it was not extending the long-stop date. In mergers and acquisitions (M&As), the parties agree on a date by which they must meet all conditions—regulatory approvals as well as administrative prerequisites —to complete the transaction. This date, once set, is binding; but it can be renegotiated.
“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,” Prosus said in a subsequent press release.
Though India’s competition regulator cleared the deal in early September, the RBI’s nod was still pending. But Prosus didn’t want to wait any longer.
BillDesk’s shareholders didn’t see this coming. What’s more, the way Prosus and PayU dealt with the matter added insult to injury. Prosus neither gave prior notice nor engaged with BillDesk’s shareholders after the 30 September email, The Ken has learnt.
An investor in payments companies The Ken spoke with called this a “corporate crime”, since Prosus was going back on a definitive agreement.
“This was unfair business conduct and something that was done in bad faith. It does lead to the possibility of litigating,” said a person close to BillDesk.