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Naspers set to acquire Citrus Pay for Rs 1,200 crore

Economic Times:  August 08, 2016

Mumbai:  South African Internet and media conglomerate Naspers is in the final stages of acquiring Citrus Pay, valuing the payments platform at Rs 1,000-1,200 crore in one of the largest deals in India's financial technology startup space.

The all-cash deal is expected to close by the end of this month or in September, two people with knowledge of the matter said.

Under the proposal, Mumbai-based Citrus Pay will be absorbed by PayU, the online payments service provider owned and operated by the Cape Town-headquartered multinational giant. Once completed, this will be a rare example of a large inbound acquisition of an Indian startup by a foreign entity.

The deal will see the exit of Citrus Pay's existing backers, a list that includes Sequoia Capital, Ascent Capital and Japanese strategic investors Beenos and econtext Asia, the people said.

Responding to ET's query, PayU Chief Financial Officer Aakash Moondhra said, "It is our company's policy to neither acknowledge nor deny our involvement in any merger, acquisition or divestiture activity, nor to comment on market rumours." Jitendra Gupta, managing director of Citrus Pay, declined to comment on what he termed as "market speculation".

Online marketplace Snapdeal's acquisition of Free-Charge for $400-450 million in April 2015 has so far been the largest deal in India's broader fintech space. At the time of that transaction, FreeCharge was primarily a recharge platform.

It has since evolved into a full-stack digital payments company. Naspers is an early backer of Flipkart, India's largest ecommerce company, and a majority investor in Gurgaon-based online travel venture Ibibo Group.

In October last year, ET was the first to report that Citrus Pay had raised about $25 million in a funding round led by Sequoia Capital and Ascent Capital, which valued the company at $90-100 million (Rs 600-670 crore at current exchange rate). Citrus Pay has so far raised about $33 million from investors since its inception in 2011.

Sequoia holds about 32 per cent of the five year-old company, while other investors own about 25 per cent. The rest is believed to be held by the founders and top management. As per ET's estimates, Sequoia, which was also an investor in FreeCharge, will make an about six-fold return on its $10-million investment in Citrus Pay.

According to the sources, Naspers is expected to pump in an additional $30-40 million into the company post the acquisition.

Both Gupta and fellow Managing Director Amrish Rau will be part of the PayU management. Its entire 300-strong employee base is also expected to be retained.

Investec is acting as an adviser to Citrus Pay.

The transaction comes at a time when India's burgeoning financial technology industry has seen significant amount of participation from private equity, venture capital and strategic investors over the past two years. It is also a segment where consolidation is expected to take place.

Founded by Gupta and Satyen Kothari, Citrus Pay competes with the likes of Alibaba Group and Ant Financial-backed Paytm, MobiKwik and Freecharge. In an earlier conversation with ET, Gupta had said that Citrus Pay processed payments of $2.5 billion annually with a user base of 21 million, and had 11,000 merchants on board.

In December last year, the company hived off its mobile banking app Cube into a separate entity, with Kothari leaving to head the new startup.

For Naspers, the acquisition marks the second major transaction in India this year, following two years of relative inactivity. In February, it invested $250 million in Ibibo Group, raising its stake in the venture to 90%.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.