PayU Submits Revised Merger Notification To CCI For The Proposed $4.7 Bn BillDesk Deal

As the Competition Commission of India (CCI) sought more details about the proposed $4.7 Bn buyout of fintech startup BillDesk by online payments major PayU India, the latter has now submitted a revised merger notification to India’s competition watchdog. 

According to a report by Inc42, the CCI has sought more information about one of the largest buyouts in the Indian internet sector and its implications from PayU in February 2022.

In response, the Prosus-backed multinational said that, “The proposed transaction will not cause any appreciable adverse effect on competition in any of the above relevant markets or their constituent segments,” according to the revised notification.

Prosus is the Dutch-listed arm of South African group Naspers.

According to the CCI website, the notice filed by PayU in August 2021 regarding the acquisition, has been marked as ‘Notice Not Valid’. This usually means that the watchdog is not satisfied with the application and has demanded more information over the proposed deal. 

PayU has provided more details about the segment for Bharat Bill Payment System (BBPS) payments in India, segment for recurring payment services, and segment for online merchant payment services in the country, the payment major said in the notification.

“CCI has not addressed the merits of the proposed transaction at this time, but only directed that a revised merger notification be filed with additional information to review the proposed transaction involving the combination of PayU India and IndiaIdeas.com Limited (BillDesk),” the company spokesperson said.

The company refused to divulge the information sought by CCI at that time.

According to the latest filings on the CCI’s website, PayU India maintained its stance that the proposed transaction “does not give rise to any competition concerns.”

“However, without prejudice to the above and for the sake of completeness to aid the assessment of the Hon’ble Commission, the relevant markets may be defined as – market for retail digital peer-to-merchant (P2M) payments in India; market for online P2M payments in India, and market for risk management for digital payments in India,” PayU said in the revised notification.

PayU India also said the markets in which it operates consist of more than 100 competitors providing similar or substitutable products and services, as per its recent filings. 

Meanwhile, BillDesk was founded in 2000 by three former Arthur Andersen executives — M N Srinivasu, Ajay Kaushal and Karthik Ganapathy. Operated by parent IndiaIdeas, it provides online payment gateway services to help businesses with settlements, collections, reconciliations, and auto-settlements.

The Mumbai-based company pits against the likes of Razorpay, Citrus Pay, Airpay, PayUbiz, Paytm, Instamojo, PhonePe, among others. It is backed by Visa, TA Associates, General Atlantic, Clearstone Venture, and Singapore’s state-held investor Temasek Holdings. 

According to regulatory filings, BillDesk recorded a consolidated operational revenue of INR 2,124 Cr in FY21 compared to INR 1,804.69 Cr in the previous year.

In the same period, BillDesk made a profit of INR 245.55 Cr against INR 211.22 Cr in the year before.

Despite being profitable, BillDesk’s singular payment gateway solution was facing heat from end-to-end payment options offered by TechProcess Payment Services, Razorpay, Airpay, Oxigen, PayUbiz, Paytm, Instamojo, CCAvenue, PhonePe among others. 

The PayU-BillDesk Deal Can Result Into ‘Potential Monopoly’

Prosus, a global consumer internet group that operates fintech company PayU announced in August 2021 that PayU will be acquiring Indian payments gateway platform BillDesk for $4.7 Bn. 

The deal, involving the merger of the two online payment gateways, was pegged as the second-largest buyout in the Indian online space after Walmart’s $16 Bn acquisition of ecommerce giant Flipkart in 2018.

However, the proposed deal soon came under scrutiny after payment rivals wrote to India’s competition watchdog expressing concern over a ‘potential monopoly’ that the merged entity would create in the online payment gateway space. 

While announcing the acquisition in 2021, PayU said the combined entity – of BillDesk and PayU – would emerge as one of top online payments providers — both globally and locally — with an annual total payment volume of $147 Bn.

Moreover, BillDesk will be the fourth major acquisition by PayU in India. Prior to BillDesk: 

• PayU had acquired CitrusPay for $130 Mn in 2016
• In 2019, it acquired payment and security firm Wibmo for $70 Mn in 2019 
• Prosus acquired a controlling stake in a digital credit platform – PaySense for $185 Mn in 2019.

All these acquisitions can be seen as a way for PayU to consolidate its market presence in the country.