The acquisition of Venture
Infotek by Atos Origin was the second major processing deal of the
summer and showed a renewed emphasis on emerging markets. The
fast-growing BRIC countries are generally seen as the most
attractive, but higher premiums mean getting a bargain can be
Two significant processing
deals in North Africa and India in the last three months indicate
an increased urgency among payments processors to access emerging
September saw the acquisition of
India’s largest processor, Venture Infotek, by France-based Atos
Origin. This followed private equity house Actis’s acquisition of
Egyptian processor MSCC in July.
The deals show the race is now on
to find the best countries and regions to expand, but the path is
littered with potential pitfalls. Choosing which payments markets
will generate the strongest return on investment requires nuanced a
more detailed look at the individual markets, according to Patrick
Byron, senior vice-president for M&A at Atos.
“China is an exciting market but is
not accessible, and Brazil is locked up by a few mega players,”
said Patrick Byron, senior vice-president for M&A for Atos.
“I don’t know how we could compete
with these monolithic local champions and see no way of succeeding
in these markets. They are outside of our scope, even if they were
in our financial means.”
That left India, and Venture
Infotek, as Atos Origin’s market of choice.
Byron said Atos had continually
been evaluating opportunities in the payments space all over the
world, but he found there were not that many suitable targets or
valuations couldn’t be justified.
It is reported Atos paid $100m for
Venture Infotek, which provides merchant acquiring, card
processing, loyalty and government benefit services to Indian banks
Byron disputes the valuation, which
was broadcast by Reuters, and suggests Atos paid a high premium for
the business, which is forecast to turn over $38m in 2011.
“It has not been communicated what
we paid, but it is not that much. That is people speculating,” said
He refutes the sale was expensive
and told CI that Atos paid a competitive price at a
competitive auction. He says there are no regrets.
“If you were to look at today’s
multiples and not the multiples of two years’ time, it would be too
short-sighted,” said Byron.
“Buying something now may seem dear, but in two or three years
time it would cost you twice as much. We believe on the short to
medium term that this is a very good value deal.”Rare access
Rare access opportunity
If the reported figure of $100m is to
be believed, it is a reflection of the premiums paid for payments
businesses in India, which are currently higher than in other
emerging markets – notably Africa and parts of Latin America. Byron
said the opportunity to buy Venture Infotek was a rare opportunity
to access the Indian market, and one Atos did not want to pass
“Venture Infotek is the only
opportunity we have ever seen in India for payments,” he said.
“It serves six of the top 10 banks
in India and is the only processor which services multiple banks.
It is a real third-party player and has a broad portfolio.”
Atos said Venture Infotek had
annual revenue growth of 25% over the last three years and expects
it to generate €30m ($38m) in revenue in 2011.
There are three main drivers that
attracted Atos to the Indian e-payments market, according to Byron.
The first is that the infrastructure to allow consumers to pay by
card is improving dramatically.
Secondly, consumer behaviour has
changed as more of the Indian population have become bankable.
There is now a growing young middle class section of the population
that are educated, well travelled and have experiences of using
debit and credit cards – something the older generations simply
Lastly, Byron notes the Indian
government is working hard to bring people into the real economy,
and has good reason to. If 85% of gross consumption is paid in
cash, a huge proportion of trade is not caught by the tax net.
Therefore the Indian public sector
desperately needs the tax revenue not currently being reported.
Byron seems optimistic about the
future when speaking of Venture Infotek’s further growth in the
market and how the processing firm will be taken forward as India’s
e-payments market develops.
“[Venture Infotek] just needs to
maintain its market share. It does not need to steal any business
from its competitors; all it needs to do is maintain its
Byron told CI that Atos
does not plan to give Venture Infotek a more European slant and
wishes to respect the local needs of what the customer wants and
how business is done.
“You don’t want to give a Rolls
Royce if you only need a Toyota,” he said.
VRL, the parent company of
Cards International, has recently launched a report
entitled Debit and Prepaid Cards Market in India. Further
enquiries should be directed to Jeannie Lam on +44 (0)20 7563