South Africa’s Naspers set to buy Citrus Pay for $180 million


South African media and internet conglomerate Naspers is set to acquire Citrus Pay for around $150-180 million, in an all-cash transaction, making it one of the largest deals in the Indian payments market, sources close to the development told TOI. With the combined entity, Naspers, which runs PayU and the Ibibo group in India, is expected to emerge as the leader in the online commerce space in terms of market share. Both Citrus and PayU focus on providing payment solutions to a growing tribe of merchants who operate online, and are largely business-facing in nature.
The acquisition talks, which have been ongoing over the past couple of months, were being led by PayU’s global CEO Laurent le Moal and chief financial officer Aakash Moondhra, with the Citrus management. Moal and Moondhra, who was earlier Snapdeal’s CFO, were in India to finalise the deal last week, sources said. PayU operates in India and 16 other emerging markets across Latin America, Europe, Asia and Africa. A person who did not want to be named said that Japan’s internet major Rakuten was also in discussions to acquire Citrus. However, the talks fell through.
Venture capital fund Sequoia Capital, an early investor in Citrus, which holds around 30% in the Mumbai-based company, is expected to make a healthy return of over 10-12 times on its investment. When contacted by TOI, Amrish Rau, MD at Citrus Pay, did not offer any comments, while Meloy Horn, head of investor relations at Naspers, said in an emailed response, “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.”
The five-year-old Citrus has in all raised around $32 million in risk capital, unlike most other capital guzzling internet businesses, from the likes of Japanese investors Beenos and EContext. Investors collectively own around 50% in the company. Less than a year ago, the payments startup scooped up $25 million from Sequoia and Ascent Capital and had been in talks with potential investors to raise more capital before the acquisition finalised.
Founded in 2011 by Jitendra Gupta and Satyen Kothari, Citrus acts as a bridge between bank accounts of merchants and banks and credit card companies. While Rau, who came on board in 2014, and Gupta are both managing directors at Citrus, Kothari carved out the consumer-facing app business into a separate company — Cube, which he controls currently — earlier this year.
The domestic payments market has been abuzz with mergers and acquisitions in the past year especially with online retailers throwing their gauntlet down to capture this potentially huge opportunity. Last year, online marketplace Snapdeal snagged mobile wallet firm Freecharge for $400 million, in what was a majority stock-swap (30% in cash and 70% in stock) deal while recently Flipkart acquired PhonePe with plans to pump $100 million into the business.Besides e-commerce and travel, there is massive potential to be tapped in the bill payments space, which the Reserve Bank of India has opened up for payment companies by bringing all billers on one common platform. Citrus recently announced that it hit an annualised run rate of processing $3 billion in e-commerce payments — in what is estimated as being a $25-billion industry. Typically, payments firms generate around 1-2% of gross revenue from their overall billings. The other large payment gateway companies include BillDesk and CC avenues.
The Citrus-PayU combine will dominate e-commerce payments, although BillDesk would be bigger if utility bill payments were included. A recent report by Google and Boston Consulting Group said that digital payments in India would grow to $500 billion by 2020 with half of all internet users making online transactions.

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