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Indian trio reap $500 million each selling payments startup

 

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At the turn of the 2000, three Arthur Andersen LLP consultants set out to develop a digital payments company, and the first institutional backer they found was an Indian state-run lender.

Prosus NV bought BillDesk for $4.7 billion this week, giving each of the three partners half a billion dollars for their combined 31 percent share.

M.N. Srinivasu, Ajay Kaushal, and Karthik Ganapathy’s journey defies India’s startup textbook standards.

Because BillDesk had never used a public relations firm, Prosus-owned PayU found itself in the position of having to handle the entire acquisition announcement.

“We aren’t the typical young startup founders,” Srinivasu said by phone, hastening to add that while Kaushal and he are 53 years old, Ganapathy is “only pushing 50.”

“When we started on Jan. 1, 2000, we didn’t have a startup idea. We thought it would be a great opportunity to build something at the intersection of tech and financial services, it was just gut-feel.”

Despite the fact that the trio has sold their full holdings, Srinivasu stated that they will remain involved in the company.

The Prosus transaction could ratchet up competition in India’s burgeoning fintech sector, where he sees huge scale opportunities since “anyone can move $100 million or $0.05 in seconds at virtually no cost.”

The founders met while working at Arthur Andersen in the financial services department and left in 1999, just a few years before the accounting behemoth imploded in the wake of the Enron Corp. affair in 2002. T

were all graduates of India’s top Indian Institute of Management, and they quit so-called “success-track” jobs to start their own businesses with little savings.

Bank of Baroda and a fund operated by financier Small Industries Development Bank of India were BillDesk’s first backers, both government-owned and the polar opposite of today’s high-profile, global venture capital firms.

Big name investors like Temasek Holdings Pte, Visa Inc., and General Atlantic LLC would not join for another decade and a half.

By that time, BillDesk had amassed a global client base and was providing its payment gateway to millions of Indian customers making purchases on Amazon.com Inc. or Microsoft Corp.’s LinkedIn service, purchasing Netflix Inc. subscriptions, or shopping on Apple Inc.’s local online store.

This BillDesk began looking into an IPO and hired investment bankers.

A few weeks ago, Prosus appeared on the scene and offered a complete buyout.

The allure was obvious: India has over 800 million internet users, and e-commerce is set to grow at a time when China is cracking down on its tech industry.

When BillDesk began, India’s internet user base numbered around 50,000. The firm’s technology conduit gathered billing data from utilities such as power and water suppliers, as well as phone companies, on one end.

On the other hand, it collected written mandates from bank customers authorising the debiting of utility payments from their accounts.

It proved to be a reliable system. Customers no longer had to wait in line to pay their bills.

There was no need for utility companies to spend millions of man hours reconciling bank transactions.

Customers didn’t have to deal with actual payments, and banks didn’t have to cope with crowded branches.

BillDesk benefited from the enormous growth in digital payments fueled by ubiquitous internet access via cellphones.

It now accepts a wide range of payments, including insurance and property taxes, as well as regular payments such as mutual fund investments, credit card payments, and school fees.

Since 2007, BillDesk has been profitable, charging the utility a commission and sharing a percentage with the banks.

According to a Prosus regulatory filing made as part of the transaction, it produced $253 million in gross revenue in fiscal year 2021, with earnings before interest, taxes, depreciation, and amortisation of $42 million.

According to Srinivasu, the founders haven’t made any plans to put their wealth to good use.

“We were the payments solution that stayed in the background, allowing banks to brand and operate our solution,” Srinivasu said. “We steered clear of the grow-big-at-any-cost fintech model.”

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