acquisition of homegrown payment gateway BillDesk for $4.7 billion. Bob van Dijk, group chief executive of South African tech investor Naspers and its international internet arm Prosus, spoke to ET’s Samidha Sharma & Digbijay Mishra about the digital payments landscape, a never-seen-before funding frenzy, impact of the Chinese government’s curbs on its Big Tech firms, and more. Edited excerpts:
You have just closed a $4.7 billion acquisition of BillDesk, the second largest M&A in the Indian digital economy after the Walmart-Flipkart deal..what’s your fintech play post this Big Bang acquisition?
We have been investing in fintech/digital payments for over a decade. Our Indian fintech story is a greenfield one, because the PayU business was developed from scratch. We did not deploy too much capital in our payments business. We invested about $1.5 billion, which is now worth more than three times. This is a great organic growth story, but we realised that if you want to get to scale — and being at scale is incredibly important in the payments business — you are better off joining forces and doing an M&A.
We have been investing in fintech/digital payments for over a decade. Our Indian fintech story is a greenfield one, because the PayU business was actually developed from scratch. Our payments business is something to be proud of, because we did not deploy too much capital. We invested about $1.5 billion over all the years which is now worth more than three times. This is a great organic growth story but we also realised that if you want to get to scale– and being at scale is incredibly important in the payments business– you in some cases are better off joining forces and doing an M&A.
You’ve done earlier acquisitions via PayU- Citrus Pay, PaySense..Why BillDesk?
As a group, we think people will use fintech to pay, save and invest much more over the next few years. That’s a strong consumer need where technology is going to play a large role over time which is exactly what we like as an investment area and fintech ticks all those boxes. Within that India obviously stands out. The Indian government has been incredibly proactive in creating infrastructure like Unified Payments Interface ( UPI), Aadhaar. That may sound like everything has happened already but there’s still a lot of cash payments here. So the fintech revolution in India is only starting.. This is where a BillDesk fits in. We believe that online payments will grow by at least a factor of 10 in the next few years.
BillDesk, PayU are focussed on the enterprises– big and small, are you also looking at the consumer side of payments?
There’s innovation and competition in the consumer wallet space, and we’ve not gone into that area because we think there are a lot of good players out there.We don’t think launching a similar proposition is going to be very beneficial. We have started working on the consumer side but that’s mainly through the Buy-Now-Pay-Later. The Lazy Pay product is more of a consumer product but credit in particular is an area where we think there is a big need in the Indian market.
ETtech
You are closely watching the global tech ecosystem. It’s unprecedented the amount of liquidity that’s available, what do you make of the funding environment in India specifically?
We’ve been investing in India for more than 15 years… We were attracted by the size of the market and the entrepreneurial talent. In the early days, there were too few internet users to build these businesses. Once users got connected via their smartphones, the game changed rapidly. There are twice as many internet users in India as in the United States. So, everybody was focused on the US originally, but India, in terms of the demographics, is a far more interesting place for the long term.
The Chinese government has been cracking down on technology companies amid a wider regulatory clampdown. You are the earliest investor in Tencent..Is India gaining because of what’s happening in China..
If you look at the number of transactions we’ve done in the last two years in India, it’s far higher and much more than before. That is just driven by India. We always had a strong interest. In India, the number of impressive, innovative companies that we see out there has just increased.
What’s the impact of Chinese stocks getting pummelled in the aftermath of the sweeping changes.. Investors like SoftBank think it will take 1-2 years for that market to stabilise
It impacts our (Tencent’s) share price. It is a really important point, and good to make here, that we are a long-term investor. We think 10-20 years ahead. In the case of Tencent, we’ve been deeply invested for more than two decades. And that’s the horizon we have when we come into India. We’re not there to make a quick buck, we’re not a fund. We don’t have an exit timing. We stay for the long term. Ups and downs, in the near term, really don’t influence a strategy – not in India, nowhere else either.
There are a lot more investors in India compared to even a few years ago…how do you compete?
We are not the only ones; others noticed India, albeit later, and deployed a lot of capital here. The world is flush with capital and people are looking for opportunities. So, it’s not unusual that they end up in India. There’s obviously a lot of money floating around and that leads to large transactions. But I think it’s justified by the potential of the market. We think the businesses we’ve backed have tremendous upside… BillDesk is a great example. The same works for companies like Meesho, Swiggy, Urban Company, Elastic Run, PharmEasy and others. Significant money is being paid, but the upside is tremendous.
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Do any of your portfolio firms plan to go public amid the IPO boom in India?
As a group, we have done many IPOs of our businesses over time in different parts of the world, so it is an option we think about. Whether it is the right thing for a company to do, it depends on quite a lot of factors. The fact that there is a market for tech IPOs does not mean it’s the right idea for a company to go public at any stage. A significant amount of management time goes into the process. If you are in the build phase, you’re very focused on your customers, (and) then it can be quite a distraction.
Do you see China-like edtech regulations coming to India? You are a big investor in the sector here with Byju’s, Eruditus..
It is hard to say how things will develop. If you look at South Korea, it was a market where there’s been a lot of regulation around online tutoring much earlier. It had a lot to do with the fact that it was basically becoming an extreme case where tutoring was necessary, because it became sort of an industry in itself that was no longer supportive to school but actually started taking over kids’ lives. I don’t think that a similar issue is at play in India. The edtech companies that I know of in India are actually are helping the overall education system rather than becoming a burden on children.
Swiggy is looking to raise again at a much higher valuation following Zomato’s bumper IPO. How do you think the competitive food-delivery sector will evolve considering players are going beyond food?
I can’t say much about Zomato, it’s not my company, I can talk more about food delivery in general and Swiggy. Food-delivery is a need that people have had for a while but it was addressed much better by a company like Swiggy, which had its own drivers and delivered a predictable end to end experience. If you think about food delivery, you have many different places in an urban area from which you want to serve the entire set of households… I think Swiggy has seen that early, others in our portfolio have also been very early on it like Delivery Hero, which has been doing this in the Middle East for many years, and in many places in Asia as well. You also have the customers already who notice the convenience of the delivery model, and it’s ( grocery) a natural extension from that. We found convenience grocery, is something that works for many customers. In India with kirana stores, some form of it existed already, but here it gets digitized, gets predictable and retention rates on this model are high. People try it, they like it, they keep using it.
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