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Indian trio reap $500 million each selling payments startup.

When three advisors from Arthur Andersen LLP set out to create a digital payments company at the turn of the millennium, they got the first institutional support from an Indian state-run lender. Proses NV this week bought BillDesk for $4.7 billion, bringing the three to invest half a billion dollars for their combined 31% stake.

 

India’s startup textbook Rule

The story of MN Srinivasu, Ajay Kaushal, and Karthik Ganapathi goes against the rules in India’s startup textbook. In an era where every funding round is touted in press statements and staffing parties, Proses-owned PayU found itself taking full charge of the acquisition announcement because BillDesk had never hired a PR firm.

“We are not typical young startup founders,” Srinivasu said over the phone, hasty to add that Kaushal and that he is 53, Ganapathy is “only pushing 50.” “When we started on January 1, 2000, we didn’t have a startup idea. We thought this would be a great opportunity to build something at the intersection of technology and financial services, it was just gut-wrenching.

Srinivasu said though all three have sold their entire stake, they will continue to be part of the business. The Proses deal could intensify competition in India’s fintech sector, where it sees massive opportunity as “anyone can move $100 million or $0.05 within seconds with virtually no cost.”

Financial services

The founders met while working in a financial services practice at Arthur Andersen and left in 1999, a few years before the accounting giant burned down in the wake of the Enron Corp scandal in 2002. All graduates of India’s premier Indian Institute of Management, he left what is called a success-track career to become an entrepreneur without any meaningful savings.

One of the earliest supporters of BillDesk was a fund run by Bank of Baroda and financier Small Industries Development Bank of India, which was opposed to government-owned and today’s high-profile, global venture capital companies. It will take more than a decade and a half for big-name investors like Temasek Holdings Pte., Visa Inc., and General Atlantic LLC to arrive. By then, BillDesk had built up a global roster of customers and Amazon.com Inc. or Microsoft Corp. Offering its gateway to the millions of customers paying in India on its LinkedIn service, Netflix Inc., or was purchasing subscriptions to Apple Inc. was transacting. local online store. BillDesk began exploring an IPO this year and hired investment bankers. Then Prosus arrived on the scene weeks ago and offered 100% purchase.

The allure was clear: More than 800 million Indians are using the Internet, and e-commerce is expected to grow at a time when China is cracking down on its tech industry.

Firm’s technology

BillDesk started when India’s internet user base was around 50,000. On one hand, the firm’s technology collects billing data from utilities such as piped electricity and water suppliers and phone companies. On the other hand, it collected paper orders from customers of banks to debit payments to these utilities from their accounts. It proved to be a robust system. Customers no longer need to stand in line to pay their bills. Utility players did not have to spend millions of hours reconciling bank transactions. And banks didn’t have to deal with physical payments where customers closed their branches. The explosive growth in digital payments on the back of ubiquitous Internet access via smartphones fueled BillDesk. It now offers the convenience of paying all kinds of payments from insurance to property taxes, and recurring payments like mutual fund investments, credit card payments, and school fees.

BillDesk, which took a commission from the utility and shared a percentage with the banks, has been profitable since 2007. It earned $253 million in gross revenue in the fiscal year 2021, while earnings before interest, taxes, depreciation, and amortization were $42 million. , according to a Proses regulatory filing as part of the acquisition.

Srinivasu said the founders did not plan to use their profits.

“We were the payment solution that stayed in the background, allowing banks to brand and operate our solution,” Srinivasu said. “We have distanced ourselves from the fintech model that is growing at any cost.”

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