Itz Cash Gets $10 Million From Matrix Partners And Intel Capital; Interview With Avnish Bajaj

Zee group company Intrex India, which provides prepaid payment solution Itz Cash, has received $10 million in funding, led by Matrix Partners, along with co-investor Intel Capital. There’s no comment on the size of the stake. Itz Cash claims a 100,000 strong distribution network across 500 towns in India, and offer cards ranging from Rs. 100 to Rs. 10,000, and an online base of 2500 merchants [via release]. Cash cards like Itz Cash, Done Cash Cards and Icash Card are used extensively for shopping and booking tickets online – around 7 percent of total monthly transactions at the IRCTC (Indian Railways) website and around 4-5 percent at are done using prepaid cash cards. While poor credit card penetration has helped the case for prepaid cash cards, they don’t meet the Know Your Customer (KYC) set by the RBI – therein lies a regulatory risk. I spoke to Avnish Bajaj, co-founder and MD of Matrix Partners about these issues:

What’s your take on the regulatory risk involved with an investment like Itz Cash?
The company is not currently regulated as per RBI norms. There is a bill in the Parliament and once that is passed, we’ll look at the situation .

What about competition from other mobile payment options?
The opportunity here is very broad – of financial inclusion and to bank the unbanked – people from the smaller Tier-1 and Tier-2. There are a few killer applications online like IRCTC, utility bill payments and gaming will also need payments. The company already has mobile payment solutions – for donations for Siddhi Vinayak Temple etc.
What about the Mobile Money Transfer Initiative?
We will have to wait for regulatory clarity of p2p payments.
If the mobile operators offer payment options?
Telecos don’t want to include payments in their bills, and there are lots of barriers. All of these applications expand our market. We’re not competing with the guy who holds a credit card.
Where do you see an exit?
The turnover of the company is Rs. 440 crores. FY08 is expected to be 980 crores, there are around 50,000 transactions a day. The obvious choise is an IPO, but we wont be forced to do an IPO for capital. Typically, as a VC, our exit is around 4-6 years.