Private equity (PE) and venture capital (VC) investments in the mobile payment sector touched a six-year peak during the first five months of 2017, with Paytm leading the pack. The surge in investments comes against the backdrop of increasing digital transactions in the country after the government's demonetisation drive of November last year.
From January to June this year, the sector attracted $1.418 billion in four deals as compared to $15 million in three deals during the previous year, mainly due to SoftBank Corp's investment in Paytm's parent company, One97 Communications.
As Paytm leverages the government's efforts to promote cashless transactions after the Demonetisation drive that started on November 8, 2016, it has attracted one of the largest investment deals in the past six-and-a-half years in the mobile payments space. It raised around $1.4 billion from SoftBank Corp in May this year. The second-largest deal during the year was a $15-million investment into balance management service app True Balance by SoftBank Corp, IMM Investment Corp, Mega Investment, Korea Development Bank, and Capstone Partners, according to data from research firm Venture Intelligence.
Interestingly, the highest fundraising at one go during the period between 2011 and 2016 in the sector was also by Paytm, which raised around $300 million from SAIF, Alibaba, and MediaTek in August 2016. The other top fundraising deal during these years was FreeCharge raising $80 million from Sequoia Capital India, Valiant Capital, Ru-Net Holdings, Tybourne Capital, and Sofina in February 2015. Again, Paytm's fundraising of $60 million from SAIF in November 2014 was the third largest deal for the period. The others who raised funds include Mobikwik, Mswipe Technologies, and EZEtap Mobile Solutions. Companies like FreeCharge and Mobikwik raised more than one round of funding during the period.
"E-wallets, mobile banking and other electronic modes of payment have caught a lot of momentum this year as, after demonetisation, the use of electronic modes of payment has substantially increased," says Khushroo Panthaky, director, Grant Thornton Advisory Pvt Ltd, in the advisory firm's report. The report, titled Fourth Wheel (Private Equity in the Indian corporate landscape) 2017, has been created in association with The Indian Private Equity and Venture Capital Association (IVCA).
"The government and regulatory authorities have worked very hard to facilitate the availability of safe and secure electronic modes of payment by strictly ensuring layers of security, both at the service providers' end and at the users' end," Panthaky added.
Exits by PE and VC investors from the mobile payment sector was also one of the highest during the period from January to June so far, with six deals worth $758 million taking place as against four deals worth a total of $236 million during the year 2016. The year 2015 saw one of the major exits in the form of a $400-million deal by Sequoia Capital India, Valiant Capital, Ru-Net Holdings, and Tybourne Capital from FreeCharge, when e-commerce player Snapdeal acquired the company in April. SAIF Partners' partial exit at $400 million and Saama Capital, Reliance Venture, and Sapphire Ventures' complete exit at $250 million from Paytm in May 2017 were the two major exits during the period between 2012-2017.
This year also saw four mergers and acquisitions (M&As) in the sector, of which the only disclosed deal was TechProcess Solutions' acquisition by Ingenico for an amount of $89 million in February. Some of the other top M&A deals that took place during the past few years include Snapdeal's acquisition of FreeCharge; Wirecard's acquisition of Great Indian Retail, which was an asset sale of $372 million, in November 2015, and PayU's acquisition of Citrus Pay for $130 million in September 2016.