The withdrawal comes at a time when many startups, upon listing, are trading at a discount to the valuations they received in private equity markets.
The PayU-BillDesk deal, which was hanging fire for want of clearance from theCompetition Commission of India (CCI), received the watchdog’s nod last monthjust before the agreed date of September 30.
“Closing the transaction was subject to the fulfilment of various conditions precedent, including approval by the CCI. PayU secured CCI approval on September 5, 2022. However, certain conditions precedent were not fulfilled by the September 30 long-stop date, and the agreement has terminated automatically in accordance with its terms,” Prosus said in a statement.
According to sources, in any deal there is a strong likelihood of some conditions that are precedent tothe deal not being met before the deadline. However, the parties usually waive the agreement or negotiate the costs. In this deal, Prosus appears to have used the technicality to cancel the deal.
“In current market conditions, $5 billion is a lot of money and funds are earning 4% US government debt. Everyone is trying to conserve capital,” said a source who was familiar with the deal.
Another source said that the government stance of treating payments as a public utility and deciding not to allow charges on UPI has taken thesheen from the payments industry. While RBI’s regulations have supported innovation and digital payments, the central bank has made it clear that businesses such as digital lending can be done only by registered lenders.
Although the reason for PayU’s withdrawal was not known, some analysts drew parallels with Elon Musk’s call to back out of his decision to invest in Twitter. Some saw it as buyer’s remorse following a drop in valuations in a business that was increasingly being subject to regulation by the RBI.