Having sold its 11.18% stake in Indian e-commerce firm Flipkart to US retail giant Walmart for $2.2 billion, Naspers continues to stay bullish on India. Chief executive Bob van Dijk said the South African media and tech group will continue to back its Indian portfolio companies: online travel portal MakeMyTrip, payments platform PayU and classifieds business OLX.
“We are not a financial company, we are not funds and we have never exited certain businesses. Asia is our focus now and China is our biggest market and India follows soon after. In the last few years, we have deployed about $2 billion in India. Followed by Latin America, Eastern Europe and Africa, which are big for us,” said Dijk.
He added that India was unique like China, where foreign businesses cannot enter the market and expect to do well. “The way to do it is by backing local entrepreneurs,” he said.
Dijk observed that there are multiple businesses where Naspers has not exited as it is not purely a financial investor. However, the decision to exit Flipkart came due to the diminishing role of Naspers in the future. "An investor who controls 77% in a company will also control the board. We did not see a role for Naspers in the company," said Dijk. The media conglomerate had first invested in Flipkart in August 2012. It then put more money in subsequent funding rounds. Its total investment in Flipkart was close to $616 million, it said in a statement after Walmart announced it had bought a majority stake in India’s biggest e-commerce player.
The stake sale in Flipkart helped Naspers clock an internal rate of return (IRR), or annualised return, of 32% in dollar terms. Better-than-average private equity (PE) firms strive to earn a dollar IRR of early to late teens in percentage terms. In local currency terms, PE firms typically chase an IRR of 20-30%.
The exit from Flipkart came soon after Naspers raised $9.8 billion by selling a 2% stake in China’s Tencent Holdings.
With close to $10 billion on its balance sheet, Naspers views India as a key market with a high potential for the next five years. Naspers group finance chief Basil Sgourdos said the India business accounted for 5.7% of the company’s revenues, with a growth rate of 76% year-on-year.
“In the past, 20% of our investments were in India, though we cannot be sure how it would be split up in the upcoming investments,” added Dijk.
The firm, which was the lead investor in Swiggy’s Series G round in June, is willing to bet on ed-tech, fin-tech and food-tech companies. Naspers is an investor in food delivery platforms across multiple geographies, including app-based iFood in Latin America and Delivery Hero in Europe and West Asia (the Middle East).