Tata Communications in talks to buy stake in Prizm Payments Services

MUMBAI: Tata Communications is negotiating to buy a substantial stake in Chennai-based Prizm Payments Services in order to expand its payment services business. The Tata Group company has appointed the investment banking arm of Standard Chartered Bank to act as its advisor. The unlisted financial services company is seeking a strategic investor, said an investment banker close to the transaction.

A Tata Communications spokesperson did not reply to e-mailed questions on the subject. Prizm Payments managing director Loney Antony said the company is yet to receive any formal bids.

Prizm Payments Services plans to raise between 500 crore and 600 crore from a strategic investor to fund its expansion plans. The company, which deploys and manages ATMs and runs payment services for credit cards, is gearing up to capaitalise on demand for public sector banks to set up over 52,000 ATMs.

Prizm was set up by first generation entrepreneurs Antony, Shyam Sunder and Jayant D'Mello and secured a first round of funding from private equity investor Sequoia Capital last year.

JPMorgan, which has the mandate to locate a strategic partner, has already completed preliminary discussions with a clutch of potential investors.

It is not clear how much equity stake will be on offer in the second round of fund-raising.

The Tata Group may not be the only bidders. Private equity investors such as Apax Partners and Avendus are also expected to put in initial bids.

JPMorgan is likely to invite the initial bids by the second week of July.

A substantial stake in Prizm Payments will provide a subsidiary of Tata Communications, TCBIL (Tata Communications Banking InfraSolutions Ltd) an opportunity to scale up its business. Prism, in turn, will get the support of a large business conglomerate.
TCBIL like Prizm, is also present in end-to-end ATM deployment and management and payment services for credit cards.

"The Tatas will have the advantage of dealing with first generation professionals who are keen on fast growth," said an analyst with a financial services firm.