The cancellation of the PayU-BillDesk deal is a loss not just for its investors, but has broader lessons too

In a surprise move, Amsterdam-headquartered investment firm Prosus N.V. has called off its biggest acquisition to buy Indian payments gateway firm BillDesk for $4.7 billion. Even more surprising is the fact that the deal collapsed in less than a month after receiving clearance from the Competition Commission of India (CCI). The all-cash deal, touted to be the largest for India’s fintech sector, was supposed to help Prosus’ payments arm PayU create a digital payments giant that would process payments worth $147 billion in annualised total payments value (TPV). For perspective, Razorpay, India’s leading payments and banking platform for businesses, processed transactions worth $80 billion in annualised TPV in April 2022. M&As are not new to Prosus. It had previously acquired Citrus Pay in 2016 for $160 million, and PaySense in 2020 for $185 million. As per the company, it has invested close to $6 billion in Indian tech companies like Swiggy, BYJU’S and PharmEasy since 2005. However, its biggest transaction in India collapsed because “certain conditions precedent were not fulfilled”, the company said.

People close to the deal tell BT that Prosus feels the valuation of the deal, inked in August 2021, is not justified anymore. Globally, public market valuations of tech stocks, along with valuations of fintech firms have suffered. In India, shares of India’s top fintech player Paytm have plunged more than 66 per cent from their 52-week high of `1,961.05 and 69 per cent from the issue price of `2,150. The fact that it took almost a year to get clearances from CCI and the Reserve Bank of India (RBI) also bothered Prosus. Stringent regulations that bar involvement of digital lending apps or wallets from transactions of loan disbursals or repayments have added to the pain of fintechs in India.

BT’s sources say BillDesk’s investors are exploring legal action against the Dutch firm. But the larger point is that when India misses out on such large deals because of regulatory delays and changing market conditions, the loss is bigger than just the one company’s investors. “When the Canadian, American, and Middle-Eastern investors put their money on India, it is not because they like India, [it is because] they think India will outperform other markets. What happened [in the PayU-BillDesk deal] is sad. It took a year to clear, [by when] the market had changed. The price didn’t go up, it actually went down, and you lost IRR of about 20-25 per cent, the kind of returns that PEs expect to generate. In such a scenario, why would a global investor think it is a great market?” was the pointed query of a global investor who wishes to remain anonymous.