BackBrink’s calls off plans to sell cash management biz in India
The firm had been looking to exit Brink's Arya India at a value of around Rs400 crore
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Brink’s, the US-based security service provider for banks, has called off its plan to sell the cash management business of its India unit, Brink’s Arya India Private Ltd, said two persons familiar with the development. The parent company was looking to exit the business at a value of around ₹ 400 crore.
Boutique bank Equirus Capital had the mandate to sell the business since March 2015.
Brink’s competitors such as AGS Transact Technologies Ltd, CMS Info Systems Ltd and SIS Prosegur had conducted due diligence to buy the business of Brink’s Arya. AGS Transact had even placed an offer, said the first person quoted above who declined to be named.
The deal, however, did not go through.
SIS Prosegur is a joint venture between the country’s largest private security services providers, SIS Group, and Spain’s cash management company Prosegur.
“There are several issues with the organization, especially over the contracts signed with the employees," said the second person quoted above.
The agreements are structured in such a way that it will be an ongoing liability for the buyer and a comparative disadvantage for Brink’s business, the person added.
Brink’s India managing director Samir Hosangady called the development “market speculation" and declined to comment further. Spokespersons at Equirus Capital and AGS Transact declined to comment. Emails sent to CMS did not elicit any response.
Hitachi-owned payment services provider Prizm Payments, Thomas Cook India and SIS Prosegur have expressed a strong interest in acquiring Brink’s Arya India business, The Economic Times had reported in March 2015.
The cash services segment in India is controlled by firms such as Brink’s, SIS Prosegur, Writer Corporation, AGS Transact, CMS and ISS SDB Security Services Pvt. Ltd.
The market for Indian security services is expected to grow from ₹ 40,000 crore (2014) to ₹ 80,000 crore in 2020, where cash and electronic security services account for 20-25% of the whole market, according to a 2015 Grant Thornton-Ficci report.
Activities within cash services include ATM replenishment, cash in transit and cash pick-up and delivery.
“Cash management service is high in the value chain and needs a lot of capital for adding facilities like artificial intelligence, etc. Larger security providers without a cash management portfolio are always keen on adding new portfolios through buying out smaller players," said Rahul Kapur, partner, Grant Thornton India LLP.
The increase in the number of ATMs across the country has led to a direct increase in demand for private security services, said the report.
The number of ATM transactions in 2012 was at 47.12 crore, which increased to 57.18 crore in 2014. The value of transactions done at ATMs in 2014 was ₹ 179,776 crore as compared to ₹ 131,838 crore in 2012, the report added.
Tapping the opportunity, several companies have already raised funds from private equity firms, while a few are exploring public listing opportunities.
In June 2015, AGS Transact Technologies had received an approval from the Securities and Exchange Board of India to raise up to ₹ 1,350 crore through an initial public offering. However, valuation remains a concern.
AGS, backed by private equity firm TPG Capital, discontinued its road shows in August due to investor apprehension over the valuation of ₹ 4,000 crore being sought by the promoter and the private equity investors, Mint reported in November.
Private equity firms TPG Capital holds 26% stake while Actis holds 16.4% stake in the firm.
Last month, Mint reported that Mumbai-based cash management company Writer Corporation plans to raise around ₹ 300 crore by selling a minority stake to private equity investors.
In September, Baring Private Equity Asia had acquired the country’s largest cash management business, CMS Info Systems, from private equity firm Blackstone Group and the firm’s promoters for ₹ 2,000 crore.
In 2013, CX Partners had invested about ₹ 300 crore in SIS Securities.
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