In September 2016, PayU, the Naspers-owned global payments company, acquired rival Citrus Pay for about $130 million in one of the largest merger and acquisition deals in the nascent digital payments industry. With two new products—Citrus Pay App and PayU Now—and investments in ZestMoney and Kreditech, PayU India claims that it will be fully profitable in the next eight months.
PayU India CEO Amrish Rau in conversation with Hita Gupta explains the upside of Citrus acquisition and its plans in the credit-lending space. Edited excerpts:
What is your view of the payments industry in India?
There is enormous opportunity in the payments market. Our job is to make the consumer and as well as the merchant accept digital payments. We are at a stage where we see only online-focused businesses accepting digital payments while offline merchants are yet to join the market. Large online-based companies will gradually expand, segments like food ordering and education will expand and in the consumer-to-consumer (C2C) economy, every consumer will become a seller. There is going to be no downturn in the payments economy for the next 15 years.
How is PayU’s business model different from other payment companies?
The only way to make this business model work is that the receiver pays for the transaction. We only get 1-2% on every transaction and in the next eight months we will be entirely profitable on our payments business. We have swung from a scenario when we were losing about `250 crore on an annualised basis about two years ago.
However, making money is difficult when there is a transaction between two individuals. So, the wallet business model may not work in a market like India. In the credit space, our revenue comes from the merchant and we do not recover that from the consumer. But when we move to bigger ticket sizes, we will start charging the customer too.
What investments have you made to expand your play in the credit-lending space?
We are not looking at business or merchant lending, we are looking at consumer lending. We have invested in Kreditech and a significant portion of that will go towards them initiating their India business and we have also made investment in ZestMoney for a small double-digit stake. But we will not go for small and medium business lending.
How is the acquisition of Citrus panning out for PayU?
Acquisition of Citrus will help us to expand our merchant base to the airline and telecom sectors. Companies such as IndiGo and SpiceJet were transacting with Citrus on their platforms and in the telecom sector it had Tata Teleservices and Bharti Airtel which were giving big business, but PayU did not have these capabilities. Now, with the Citrus acquisition it has become a big opportunity for us in the Indian market.