Premji Invest, other private equity investors may seek exit from payment firm FSS

Apparently, investors in FSS are expecting valuations to be in the ballpark of Rs 4,000 – 5,000 crore or about $500 million, but the market pricing for the company is in the range of Rs 2,500 – 3,000 crore.

Financial Software & Systems Pvt. Ltd (FSS), one of India’s oldest payment companies, is exploring options to provide an exit for its private equity investors.

Shareholders, including Premji Invest (family investment office of Wipro Enterprises founder Azim Premji), Bala Deshpande-led New Enterprise Associates (NEA) and Jacob Ballas Capital, who collectively own 45-50 percent of FSS, are seeking an exit, multiple people aware of the matter said, requesting anonymity.

“All the options such as stake sale to private equity investors, possible merger with companies interested in the payments business and listing of FSS in the stock exchange are being considered presently,” said a senior banking industry executive, one of the people cited above, aware of the matter.

Investment bankers will likely be hired soon to work on exit options for investors. The people cited above said that valuations are proving to be a dampener for the transaction to go through as there may be a mismatch between the current valuations for payment companies in India and what investors, including promoter Nagaraj V Mylandla, are seeking.

To be sure, most payment companies have experienced a valuation markdown in recent times in India and globally.

Investors in FSS expect valuations to range from Rs 4,000 to 5,000 crore, substantially higher than current offers, the people said.

“Investors don’t seem to be getting the valuations that they desire, which is leading to talks getting stretched,” said a banker aware of the matter.

V Balasubramaniun, a senior executive of FSS and CEO of FSS Cashtech and Paytech, told Moneycontrol that the management is currently weighing all possibilities. “Private equity investors are seeking an exit, and we are working on all possible options to provide one, including the option of exploring an IPO,” he said over a phone call.

Responding to an email to Premji Invest seeking comments on the development, the private equity fund’s spokesperson said: “We are investors in the company. The company is an important asset in the Indian payments ecosystem. We are supportive of the company’s plans and have no further comments.” Spokespeople for Jacob Ballas and NEA could not be reached immediately for comments.

Founded in 1991 by Mylandla, FSS is one of the oldest domestic players and among the market leaders in India’s payment technology and processing industry. Headquartered in Chennai, the company caters to banks across the spectrum and has operations across 26 countries. Carlyle was one of the early investors in the company and its 34 percent stake was sold to  NEA and Jacob Ballas in 2009.

Later in November 2014, Premji Invest picked up about a 17 percent stake in FSS for Rs 350 crore. Collectively, the three funds have held investments in FSS for 10 – 16 years. The funds from which these investments were made have reached the end of their tenure. Consequently, the investors are seeking an exit from the company.