Prosus—one of the biggest backers of India’s internet economy with investment of over $5 billion— said it is keeping cash reserves for potential M&A opportunities for portfolio. The firm said it’s focusing on the health of the businesses it has invested in so that they can come out stronger from current crisis as it deals with the impact of pandemic.
Prosus, along with its South Africa-based parent company —Naspers, is the largest investor in food delivery major Swiggy and education technology platform Byju’s besides owning online payments firm PayU and digital classifieds business OLX, which are also its “core areas” of further investments.
Prosus, which sees India as the most important market, highlighted in an analyst call that it has $4.6 billion in net cash and can also raise debt, if needed. “So we have actually a lot of capacity to do further M&A without raising further funds,” said Naspers CEO Bob van Dijk.
Prosus had used the slowdown in financing environment in 2016 to initiate $2-billion merger of online travel portals—Makemytrip and Ibibo— besides buying Citrus for payments business PayU for $130 million. Last year, Prosus swapped its stake in Makemytrip for shares in China’s largest online travel player Ctrip.
One of the potential areas of consolidation is food delivery, where Prosus also has investments in Brazil and Europe besides India, where Swiggy has received $1 billion. Top executives of Prosus said they see food delivery as “recession-proof” but also competitors could struggle given the capital intensity.
“I think you’ll see some of the weaker businesses globally struggle to survive in this new context,” said Larry Illg, who heads food delivery investments at Prosus.
Swiggy competes with Ant Financial and Info-Edge backed Zomato, and the two companies have held multiple discussion for merger in the past but issues relating to valuation and management have been a roadblock.
PayU, for which India accounts for over half of the business, saw a 50% fall in transactions after a lockdown in India but is starting to recover, Prosus added. “It is still too early to assess the full impact on the business in India. But, we are confident that PayU is well-positioned as e-commerce recommences online, thanks to the solid portfolio of very large (e-tailers),” said Dijk.