New Enterprise Associates (NEA) and Jacob Ballas private equity will together buy out one of Carlyle’s early Indian Investments
in Chennai-based Financial Software & Systems (FSS), the largest domestic payment technology firm.
Sources said NEA and Jacob Ballas are set to invest $60 million into FSS in return for 40% stake in the firm. This include Carlyle’s 34% stake as well as additional cash infusion. The deal could be unveiled in the next 2-3 weeks.
Carlyle, which had invested $10 million from its first growth fund in India in 2001, will move out with handsome gains, said sources privy to the development.
Investment Bank Veda Corporate Finance is advising on the deal.
The nearly two-decade-old FSS has around 1,200 employees across multiple locations in India and overseas. The company has two divisions — FSS Technologies, providing solutions to roughly 25 odd banking clients in managing their front-end payment systems — as well as back-end processing and FSS Net, which manages ATMs and Internet payment gateways on behalf of banks.
When contacted, Bala Deshpande, who quit ICICI Ventures to join NEA, declined to comment. FSS too offered no comments on the possible transaction with the new investors.
The growing market for ATMs and the company’s transformation from being a solutions provider to managing systems and processing appear to be a story that new investors are buying into. FSS battles out with MNC rivals such as Euronext and First Data, and is expected to report Rs 260-crore turnover in the current fiscal.
The impending deal values the firm at almost two times its revenue, sources added.
It is believed that part of the funds being infused by new investors will go into ramping up the FSS Net division, which hopes to operate nearly 7,000 ATMs on behalf of 6-8 banks in the next 3-4 years, up from 1,600 at present. FSS also plans to tap new areas such as deployment of point of sales systems and merchant acquisitions, besides bolstering its role in the mobile and internet payment segments.
The company expects this division to be the growth driver, mopping up domestic revenue through managing and processing payment systems for banking clients. FSS Technologies, the division providing solutions to customers, will increasingly focus on overseas markets, especially in ASEAN and the Middle East.
Source: Economic Times