Prosus is preparing to spin off PayU, its international payments business and plans to have the unit in a “listable” form by the end of 2024, interim CEO Ervin Tu says.
PayU, founded in 2002, is a digital payments service provider with a presence in more than 50 markets. The platform is used by 450,000 merchants and millions of consumers — making it one of the biggest — and has fintech investments totalling more than $1bn.
Earlier in the year, Naspers’s Amsterdam listed subsidiary agreed to sell PayU’s Global Payments Organisation (GPO) to UK-based Rapyd for $610m (about R11bn) cash as part of efforts to streamline the group’s fintech operations.
The group says PayU, which is wholly owned by Prosus, will be profitable by the end of the financial year ending March 31 2024, making it a prime target for a stock market flotation.
“We are working very hard to prepare the business ... Our aim is to have that [business] in listable form sometime next year, most likely in the second half of next year,” Tu said.
“The business is a gem in our portfolio with real momentum, both on the payments side — which is its historical core, but also now on the credit side. We look forward to great continued performance from our PayU business.”
Prosus is scrambling unlock value from its vast portfolio of businesses in food delivery, classified, fintech and education, estimated to be worth $30bn but which isn’t fully reflected in the Prosus share price. The value of units such as PayU, Brazil’s iFood, Germany’s Delivery Hero and India’s Swiggy are dwarfed by the group's $100bn stake in Tencent, the China-based technology and entertainment conglomerate.
Prosus reported that PayU enjoyed a strong overall performance in the six months to September, with the core payments service provider (PSP) business turning a profit and growth expected to continue in India.
Consolidated revenue for its payments and fintech division grew 32% to $497m, as core PSP business grew total payment volumes by 20% and reported a trading profit margin of 2%.
Consolidated trading losses narrowed to $22m.
As part of the growth plan, Prosus said credit in India accounted for more than 70% of new initiatives for the first half of the current financial year. The India credit business grew revenue by 31% to $43m in the period.
With PayU now essentially an India-focused business, expectations are that Prosus is likely to consider listing the unit in that country.
Peter Takaendesa, head of equities at Mergence Investment Managers, said market conditions look attractive for a listing in that market.
“Valuations still look quite attractive in the Indian market for a number of stocks,” he said.
He highlighted ITC India, which is 29% owned by British American Tobacco, as an example of a company trading at a price:earnings ratio of 25. The Indian stock market is trading at a PE above 20, while the JSE is at 11.
“Zomato’s share price has doubled year to date. If Indian market conditions remain this strong into next year then the listing of PayU India should be a success,” Takaendesa said, referring to the multinational restaurant aggregator and food delivery company, which listed in India in July 2021.
Still, Tu said the final move to list will depend on market conditions. “Whether the markets are conducive, we can’t control,” he said.
The JSE has experienced a swathe of delistings in recent years — particularly in technology with the likes of Jasco, Adapt IT, Alaris, Etion and Alviva all departing.
Depressed market conditions have also been blamed for several listings not proceeding — including Telkom’s Swiftnet unit, which had been expected to bring in R13bn but was shut down at the start of 2022.
Besides PayU, the Naspers/Prosus stable counts iFood, OLX Europe and eMAG, as other businesses that are “gems” in the portfolio. Unlocking value, however, does not necessarily mean the group will look to list these units.
“Our intent is not to list every single business in our portfolio that’s privately held. Listing is appropriate for businesses when that event can actually help the business, or perhaps there’s a valuation disconnect between what an asset could be worth in the public markets versus what it’s worth under private ownership,” said Tu.
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