US-based software firm Ebix Inc. has acquired an 80% stake in India’s ItzCash Card Ltd for $120 million (Rs 778 crore), becoming the latest entrant in the country’s fast-expanding digital payments market.
Ebix will pay $76 million of cash upfront and a contingent earn out of up to $44 million payable over three years from closing, the Nasdaq-listed firm said in a statement. The transaction, which values ItzCash at $150 million, closed on Tuesday.
The US company joins the likes of Japan’s SoftBank Group Corp and South African technology conglomerate Naspers in entering India, as the digital payments sector exploded after the government banned old high-value currency notes late last year to curb cash transactions as part of efforts to tackle corruption and tax evasion.
SoftBank invested $1.4 billion in top digital wallet company Paytm for a 20% stake earlier this month. Naspers group’s online payments company PayU bought Mumbai-based rival Citrus Pay for $130 million last year.
India’s digital payments industry has seen several other M&A deals this year. In February, Infibeam Incorporation Ltd merged CCAvenue with itself in a deal that valued the payment gateway firm at Rs 2,000 crore ($298 million).
The same month, the United Arab Emirates-based payments solutions provider OMA Emirates acquired Mumbai-based MobiSwipe Technologies Pvt. Ltd to broaden its portfolio in the Middle East, Eastern Europe and Asia-Pacific regions.
Ebix said it will retain ItzCash’s management team led by managing director Naveen Surya. The team includes chief business officer Ravi Singh, chief technology officer Daykin Creado and chief growth officer Bhavik Vasa.
ItzCash, part of media baron Subhash Chandra’s Essel Group, was founded in 2006. The company had previously raised funding from Matrix Partners, Intel Capital and Lightspeed Venture Partners. In July 2009, ItzCash raised $10.3 million from Matrix, Intel Capital and Lightspeed. In 2007, it had raised $9.3 million from Intel Capital and Matrix, according to VCCEdge, the data research arm of VCCircle.
All three will exit as part of the latest deal, Reuters reported, citing Vasa. Separately, Business Standard cited Surya as saying that the deal has given its early investors three to five times return on their investment. Essel will retain a 20% stake.
ItzCash operates in three verticals—digital payments, remittance and corporate business. The company offers prepaid cards, money transfer and wallet services to retail consumers and provides cash management services, an online payment gateway and gifting solutions to corporate houses.
Ebix chairman Robin Raina said the company found attributes in ItzCash that none of its peers had – market penetration across 3,000 cities, 75,000 brick-and-mortar distribution outlets, a compound annual growth rate of 35% and the only company which was profitable amongst all its peers.
ItzCash claims to process about 600,000 transactions a day and $2 billion in annual payment volume.
“We believe that the synergies between Ebix and ItzCash are at multiple levels and the ItzCash exchange when complemented with Ebix’s portfolio of insurance and healthcare services along with our international scale, will set the foundations of a very powerful and scalable business opportunity,” Raina added.