PayU is a fintech company that offers payment technology and services to online merchants. Founded in 2002 and headquartered in the Netherlands, PayU is now in the process of acquiring a majority stake in PaySense, which is an Indian digital credit platform. The estimated equity valuation is around $185 million.
According to the Economic Times, the entire deal will be closed in cash and PayU will control 80% of PaySense’s stocks. As of now, PayU owns 20% of the Indian digital credit platform.
Some of the venture capitalists that have backed PaySense include Jungle Ventures, Rocketship and Nexus Ventures Partners. PayU will essentially be buying the majority stake form all VCs, as they have all decided to exit PaySense. The sale will be done in two separate stages.
Through this acquisition, the payments firm is merging its lending business called LazyPay with PayU. The global head of credit at PayU has also stated that the company will put $200 million in the new acquisition in the next two years, with $65 million as an immediate investment. Hence, the total deal size will amount to $300 million.
What PayU does is try and penetrate the Indian lending market, as, according to BCG research, can easily reach $1 trillion in the next 5 years. PayU has been been expanding its payments portfolio of companies. For example, the company acquired Wibmo, a payments tech firm, for $70 million last year.
The founder and CEO of PaySense, Mr. Prashanth Ranganathan, will be the one to lead the new entity focused on credit in India as its chief, as reported by Finance Magnates. PaySense’s employees will be moving to the new entity as well.
The Indian lending sector has a huge potential, as various research publications show. Technology will certainly play a huge role in disrupting that sector, and while the acquisition may seem high in terms of valuation, given the potential size of the market, it may be very well justified.