Japanese corporate giant NTT Group is in discussion with payment service provider Prizm Payments Services Pvt Ltd to acquire a substantial stake in the Chennai-based company.
Prizm is a leader in third party automated teller machine (ATM) maintenance services. The percentage of stake Prizm is diluting is not known yet. However, if a controlling stake transaction happens, it would be in a range of Rs 800-1,000 crore, said people close to the development.
NTT Group is likely to acquire the stake through its Indian arm of NTT Communication. US banking giant JPMorgan has the mandate to find a strategic partner for the Sequoia Capital India-backed Prizm. According to earlier reports, Tata Communications Ltd was also in negotiation with Prizm to acquire a stake in the firm. Apart from telecommunication companies, a few private equity firms also have shown interest.
The funds to be raised from the stake sale will be invested for setting up more ATMs, as the demand from public sector banks is on high. The company is in the process of setting up 50,000 ATMs for public sector banks.
Prizm, formed in 2008, has deployed 10,000 ATMs and 25,000 POS devices (A point-of-sale device is used for processing credit /debit card transactions) under its management. Venture capital firm Sequoia Capital had invested about $15 million (about Rs 83 crore today) in Prizm in two rounds in 2008 and 2011.
Mails sent to Loney Antony, managing director (MD), Prizm Payments and S Wada, MD, NTT Communications India, did not elicit any response till the time of this story going to press.
As the mode of cash transactions has seen a shift towards mobiles, telecommunication companies have identified the space as an attractive destination. Recently, Prizm had entered into an arrangement with Mswipe Technologies P Ltd for providing services to Mswipe’s mobile POS terminals.
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Leading Indian banks are also on their way of shifting transactions to mobile technologies. This month, Axis Bank Ltd, India’s third largest private lender, joined hands with Prizm and Mswipe to roll out Swipeon, a mobile phone-based card acceptance service. The service will convert mobile phones into a card acceptance device by attaching the Mswipe card reader to the phone.
However, experts believe margins in this business are meager compared to the large investment size. “As per the changed guidelines, banks are unable to generate substantial revenue through ATM transactions and the same will affect the facility provider, too,” said a partner with an advisory firm, requesting anonymity.
Banking transactions through mobile phones have trebled to Rs 286 crore during May, compared to the corresponding month last year, on account of a higher number of users with hand-held devices, according to the Reserve Bank of India.