At an earnings press conference five years ago, journalists probed a senior State Bank of India official about mobile wallets challenging the monopoly of banks in payments. The official remarked that while the Press was excited about mobile wallet startups, the actual payments game was dominated by the then decade-and-half-old BillDesk.

Banks will continue to be the origination point of digital payments with tech companies playing a supporting role, he asserted, adding that journalists should interview the founders of BillDesk to understand how digital payments worked in collaboration with the banking ecosystem.

Some of that insistence may have stemmed from the fact that India’s largest public sector lender had been a key backer of BillDesk. SBI had invested Rs 10 crore in the payments gateway in 2006 for a little over 9% stake, valuing BillDesk at Rs 108 crore (about $23 million then). It sold about half its stake in 2014 and the remaining 4.3% stake for Rs 185 crore in late 2015. At the time, BillDesk was valued at Rs 4,320 crore (about $680 million then). 

Paytm, Citrus Payments, Freecharge and Mobikwik were household names then, whereas BillDesk, which was giving multifold returns to its investors, continued to operate discreetly. While several startup entrepreneurs have been gaining cult followings on social media, BillDesk’s founders Ajay Kaushal, M.N. Srinivasu and Karthik Ganapathy are hardly known outside the fintech circles.

PayU’s acquisition of BillDesk for $4.7 billion, or over Rs 34,000 crore, is the second largest M&A transaction in India’s startup ecosystem, after Walmart’s $16-billion buyout of Flipkart in 2018. That it is an all-cash deal means big returns for BillDesk’s founders and investors—including venture firms Clearstone and March Capital, private equity firms General Atlantic and TA Associates, and strategic backer Visa.

More significantly, the deal creates a giant in India’s digital payments landscape with total payments value at $147 billion, revenue of over $752 million, EBITDA of $57 million, and valuation of $12 billion. The figures are from an investor presentation by Prosus, the Amsterdam-listed owner of PayU that has now deployed over $10 billion in India’s digital economy.

To put these numbers in perspective, the total value of all card and UPI merchant payments in India in financial year 2020-21 is estimated to be about $270 billion, based on the current run-rate. Even ignoring ecommerce transactions through netbanking, the combined PayU-BillDesk entity would command nearly 50% of India’s digital payments market. 

The CapTable analyses the business dynamics behind the acquisition, code named Project Bolt by the parties involved in the deal. We also look at why the deal makes sense for Prosus and BillDesk, and its potential impact on India’s digital payments ecosystem.