Private equity firm CX Partners is picking up 75 per cent in the India ATM business of Australia's Transaction Solutions International Ltd for $22 million (Rs 121.7 crore). The deal will be completed in several tranches, with the Ajay Relan-led PE firm first investing Rs 80.5 crore initially.
The deal, which would value the Transaction Solution International Pvt Ltd at Rs 160 crore or $29 million, is dependent on the condition that Transaction Solutions gets a contract to supply 500 new ATMs at an agreed internal rate of return before March 31, 2013. The deal is also subject to shareholder approval.
Transaction Solution is involved in the business of deploying ATMs on behalf of banks and also has contracts for automation of bill payments processes. Its clients include HDFC Bank, Punjab National Bank, Tamil Nadu Mercantile Bank, SBI Cards, IndusInd Bank, among others.
The company recorded an operating loss of $1.2 million for the six month period ending September 30 due to upfront cost involved in deploying ATMs. The company has increased ATM installation in April-September period by 14.3 per cent to 950 ATMs.
In the same period, transactions across its network increased 24 per cent with revenues up 26 per cent to around Rs 25 crore.
Market opportunity for ATMs is considered to be large. In the US, the ratio of ATMs to population is 1:700, while in India it is 1:15,000.
The number of ATMs in India is forecast to increase from approximately 95,000 in 2012 to at least 200,000 in 2017. Recently, emerging markets private equity major Actis invested $40 million for an undisclosed stake in AGS Transact Technologies Ltd.
India’s cash management economy, which includes businesses like maintenance of ATMs and transporting cash, has been on the radar of PE firms for a while.
CX Partners has another investment the area. Earlier this year, it invested Rs 500 crore in Delhi-based private security firm Security and Intelligent Services (SIS), which has a JV with Spanish firm Prosecur to provide security service in cash management.
(Edited by Prem Udayabhanu)