TA continues India spree by backing BillDesk

"The business is driven by rising internet penetration and an increasing preference for electronic payment versus cash and check," Dhiraj Poddar, a director at TA Associates, tells AVCJ. "The market is expected to grow pretty quickly, with certain segments growing 50% year-on-year."

Poddar, who will join the BillDesk board, estimates that the annual amount of money transacted in online payments in India, excluding business-to-business transactions, is $12-15 billion. Yet, the penetration of e-payment is still in the single digits; even when consumers do venture online to do their shopping, cash-on-delivery accounts for a large portion of payments.

There are several leaders in India's nascent payment market, including Prizm Payments (ATMs), mChek (mobile payments) and ItzCash (pre-paid cards), as well as BillDesk. Within the e-commerce space, BillDesk focuses on cultivating exclusive relationships with institutions. Its network is used by more than 50 of India's largest banks, as well as by major merchants across the utilities, telecom, insurance, and mutual funds industries.

Poddar argues that this approach is highly defensible. First, institutional customers prefer to deal with service providers they know and are therefore loath to change; second, any merchant looking for a partner is likely to opt for an established network like BillDesk. However, these advantages will only stay intact as long as BillDesk's technology and security offerings continue to evolve with the times.

TA's investment is a secondary transaction, its capital facilitating the exit of one or more of BillDesk's existing VC backers. In 2001, Bank of Baroda and SIDBI Venture Capital, a subsidiary of the government-affiliated Small Industries Development Bank of India, invested $850,000. Five years later, Clearstone Venture Partners and State Bank of India put in $7.5 million.

Poddar describes TA's entry into BillDesk as "more like an invited guest," adding that the firm may participate in future funding rounds if the opportunity arises. BillDesk ultimately intends to go public, but there are no formal plans as yet.

As to how TA can support BillDesk, the firm points to its long history of investment in the electronic payment space, where it has built up a sizeable portfolio that includes online security software developers and specialist financial technology providers. "We can add value in the process of scaling up, helping out on the financial side and with the recruitment of new talent," Poddar says. "There are also certain relationships we can bring to the table from our existing network in the US and Europe.

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• Topics
• South Asia
• Technology
• Expansion
• India
• TMT
• Growth capital
• TA Associates