BTI Payments looking to raise Rs250 crore from PE funds3 min read . Updated: 21 Jun 2016, 04:21 AM IST
BTI Payments seeks to expand its so-called white label ATM business, hires a domestic investment bank for discussions with private equity firms
Mumbai: BTI Payments Pvt. Ltd, an automated teller machine (ATM) management and payment services company, is looking to raise around ₹ 250 crore from private equity (PE) funds as the company looks to expand its so-called white label ATM business, according to two people aware of the development.
The company, backed by ICICI Venture, has hired a domestic investment bank which has initiated discussions with PE firms for the investment, one of the two people said on condition of anonymity.
BTI Payments is looking to raise as much as ₹ 250 crore of capital to invest primarily in growing and expanding its white label ATM business, which it started in 2013, he said. The firm is looking to raise the corpus entirely from new investors, the first person added.
White label ATMs are non-bank cash machines operated by private companies that essentially operate as outsourcing partners of banks.
In June 2012, the Reserve Bank of India issued policy guidelines permitting non-bank entities to set up and operate ATMs. Earlier, only banks were permitted to set up and operate ATMs.
The primary objective of permitting non-banks to operate ATMs was to increase the penetration of cash machines.
BTI Payments is a unit of Banktech Group Pty. Ltd, an Australia-based payments technology solutions provider. Banktech began operations in 1991 as an ATM refurbishment and repair business.
According to the group’s website, it owns and manages more than 15,000 terminals across the banking, hospitality and gaming industries in Australia, South-East Asia and India and processes over Australian $1 billion (around ₹ 5,036 crore) worth of transactions a month.
In India, BTI Payments is focused on setting up its white label ATM network in the smaller cities and towns that are still significantly under-penetrated, said the second person cited above, also requesting anonymity. “ATM concentration in metro and tier I cities is high and new ATM installations in these geographies (tier II and III cities) is low. However, there is good scope for growth in tier II and III and rural areas," the second person said.
“Banks would rather depend on third-party ATM companies than spend a lot on setting up their own ATM network in these areas," he added.
BTI Payments and ICICI Venture declined to comment on the development.
According to a 21 December report by news agency Press Trust of India, the company has installed around 3,000 ATMs so far across the states of Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Maharashtra, Bihar and Uttar Pradesh. More than 90% of the installations were in semi-urban and rural markets.
BTI is targeting installation of around 9,000 ATMs by March.
In November 2013, ICICI Venture invested ₹ 140 crore in BTI Payments. The investment took place together with a ₹ 110 crore infusion by the Australian promoter in the company for branching out into setting up white label ATMs in India.
ICICI Venture invested in the company through its third fund. In April, ICICI Venture said it had raised $190 million from investors for the first close of its fourth fund.
BTI’s competitors in the white label ATM space include companies such as TPG Growth- and Actis Llp-backed AGS Transact Technologies Ltd and Hitachi Payment Services Pvt. Ltd.
In the last five years, PE investors have invested around $194 million in ATM and payment technology services businesses, shows data from Venture Intelligence, a research service focused on private company financials.
In the largest transaction in the space, AGS Transact Technologies raised $40 million from Actis in 2012. The previous year it had raised $32 million from TPG Growth. Other transactions in the space include Apis Partners’s $25 million investment in Electronic Payment and Services earlier this year and CX Partners’s $22 million investment in Transaction Solutions International in 2012.
According to Khusroo Panthaky, a Mumbai-based financial services adviser, while ATM installations are on the rise, the use of various electronic payment methods is bound to impact the growth and usage of ATMs going ahead.
“People have started using different devices for payment purposes, whether it’s electronic wallets, mobile banking, direct payments through bank accounts or through debit and credit cards. The rise in these modes of payments is bound to affect the growth in ATM installations," he said.
But Panthaky added that there is still a huge scope for ATM roll-outs in semi-urban and rural areas. “People are also trying to differentiate by offering additional services through ATMs, rather than just cash withdrawal, which can lead to increased usage," he added.
In the period from 2011 to 2015, the number of ATMs installed in India increased from 87,355 to 193,000, growing at a compound annual growth rate of 22%, according to data from the Reserve Bank of India.