Prosus, the Dutch investment firm controlled by South Africa’s Naspers, has benefitted massively from Swiggy’s latest IPO – it gained over $2 billion on its investment in the food delivery aggregator. That, despite a rather weak overall market sentiment. That return seems to have encouraged Prosus towards a potential IPO for its India-focused fintech subsidiary — PayU.
Initially, Prosus had aimed to make PayU’s IPO happen this year – aiming to get a valuation of $5-7 billion – but the latest comments from Prosus’ Chief Investment Officer Ervin Tu suggest that the timeline will change. “We’re late into 2024 already, but we hope that it could be a 2025 event,” Tu commented on the matter.
Netherlands-based PayU, founded in 2002, has made a name for itself in the digital payments and lending landscape in India. It entered the Indian market 13 years ago, dominated it for a while but has since faced growing competition from other fintech players like Razorpay and PhonePe. These competitors are backed by the likes of Tiger Global and Walmart and have captured a dominant share of the domestic digital payments sector. Despite this, PayU has carved out a significant niche by providing payment solutions and expanding into lending services for both consumers and small businesses. A recent UBS report raised its valuation to $4.2 billion.
A significant obstacle in PayU’s path to public listing was a 15-month regulatory ban that prevented the company from acquiring new merchants. The firm resumed its growth trajectory earlier this year, after it received approval from the Reserve Bank of India (RBI) (in April, to be precise) to operate as a payment aggregator and expand its merchant network.
This development comes at a time when the country’s digital payments sector has seen explosive growth in recent years, thanks to increased internet penetration and government initiatives like Digital India, amongst other factors. FY24 saw the country clock an annual growth of 44% in its retail digital transactions, with overall payment volumes rising by 20%. These statistics provide a glimpse of why Prosus views India as a key market – today, the investment firm’s portfolio includes several Indian startups – such as online e-commerce marketplace Meesho and home services provider Urban Company among its investments in the country. Swiggy is another one – as mentioned earlier – and Prosus had acquired a 31% stake in Swiggy.
As for PayU itself, the firm has a presence in 17 countries (as of 2018) and has been gearing up for a public listing since last year. It is currently owned by the Naspers Group, and FY24 saw its revenue clock an annual growth of 11% – amounting to $444 million for the period – and PayU has been working with financial advisers, including Goldman Sachs, to prepare for the IPO. It is expected that it will file its Draft Red Herring Prospectus (DRHP) sometime early next year, with the IPO likely raising at least $500 million.
