ICICI to hive off PoS units first; delays plans to separate ATM network

ICICI Bank has decided to farm out its point of sale (PoS) terminals first, and has delayed hiving off its ATM network. A deal finalising the sale of the bank’s two lakh-plus PoS terminals, which are used for swiping credit and debit cards for payments, is expected to be concluded in April. ICICI Bank is looking at a valuation of over $100 million (Rs 500 crore). According to sources, close to a dozen companies in the payments business have shown interest in the bank’s PoS network. Of these, several have been shortlisted and have accessed the data room, which has been opened to final bidders. Besides being the highest bidder, other conditionalities have been attached to the sale. Topmost among these is the condition that transaction costs should be brought down. The bank is also looking at a much faster rate of deployment in the future. The final discussions with the bidders are likely to kick off in the next few days. ICICI Bank is likely to sell the PoS units outright or keep only a part of the stake so as to help the transition for the new owner. It will continue to be the settlement bank. Those interested include Visa, FSS, Total Systems Services, KKR-owned First Data Corporation, Blackstone-CMS joint venture and Venture Infotek. A few private equity investors have also shown interest. The bank was earlier looking at hiving off both its ATMs and PoS terminals into a separate company. However, given that the regulatory environment is still evolving, the bank has decided to wait for some time. In credit cards, there are instances of at least two foreign banks having hived off their POS network. However, their terminal numbers are negligible compared to that of ICICI Bank, which processes nearly half of the card transactions in the country. Among banks, SBI is planning a massive deployment of POS terminals that will rival ICICI’s network. However, the country’s largest bank has gone slow on the project and has set up a payments division to take a holistic view of opportunities in this segment of banking. The build-operate-hive off strategy is not new to ICICI Bank. The largest private bank has earlier done this with its technology arm 3i Infotech, which began as the erstwhile ICICI’s registrar and transfer services arm. A similar strategy was followed for Firstsource (formerly ICICI Onesource), its business process outsourcing outfit.