Aavishkaar backs Indian ATM outsourcing company EPS

EPS provides ATM and retail point of sale payment outsourcing services. It won Aavishkaar's backing in 2012 after signing a contract to deploy over 5,500 ATMs in rural areas in the state of Maharashtra for public sector banks over the next two years. As of May, EPS had installed a 1,000 ATMs.

The investment came from two funds - Aavishkaar Goodwell II and Aavishkaar II, the same as the last round.

Aavishkaar has previously invested in Vortex Engineering, which produces ATMs for remote locations across India.

In April, CX Partners acquired 75% of the Indian ATM unit of Australia's Transaction Solutions International (TSI) for INR1.2 billion ($22.13 million then). TPG, Actis, Sequoia Capital and Jacob Ballas all have made investments into Indian ATM companies.

India is significantly under-penetrated when it comes to the number of ATMs per person - the ratio of ATMs to people is 1:15,000, compared with 1:700 in the US.

According to market reports, approximately 40% of the country's rural population still lack access to bank accounts, but the small transaction volumes in these areas don't justify the introduction of full branches. ATMs are an efficient means of providing basic financial services.

The government has allowed outsourcing of these terminals under two schemes. The older of these is the "brown label" concept, whereby ATM management is outsourced to vendors, with banks retaining responsibility for settlement and banking processes only.

Last year the Reserve Bank of India also allowed private companies to set up "white label" ATMs - where not only the investment but the entire ownership and deployment strategy is with the third-party service provider. The ATMs are to be installed in tier-three and tier-four cities.

White label operators are required to have a minimum net worth of INR1 billion ($15.6 million), which is to be maintained at all times.

Tata Communications Payments Solutions, and Sequoia Capital-backed Prizm Payments have received approval to participate in the scheme

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