A Unicorn, But still Interswitch
Now a Unicorn, but does it make the play harder for competitors or Interswitch?
Founded by Mitchell Elegbe, Interswitch led with the vision to digitize Nigeria’s then cash-based economy.
Its headquarters situated in Lagos, the busiest city in Africa. Interswitch presence has been felt in East Africa in 2011 when it bought a 60 percent stake in Bankom then Uganda’s only company of the kind. Interswitch also acquired a majority shareholding in Paynet Group, the East-African payments provider.
The CEO comments on this “We are targeting acquisitions in other countries, and where we can’t acquire, we will partner with the owners,”
The African Payment giant also has customers in 23 African countries. In 2013 Interswitch entered into a deal for with Discover Financial Services and Verve went global to be accepted in the US etc.
In February 2018, Interswitch unveiled its SPAK National Science Competition to promote and reward excellence in Science, Technology, Engineering, and Mathematics in Nigeria.
Currently, Interswitch provides much of the platform for “switching” rails for most of Nigeria’s banking sectors and ATMs card, with over 11,000 ATMs on its network. According to reports verve is the most used card in Nigeria. Interswitch now processes over 500 million transactions per month in a market that is seeing soaring growth in electronic payments.
Now let me remind this!
In 2010 Helios Investment Partners took a two-third stake from Interswitch in a 26 billion naira ($170 million) investment deal in partnerships with a consortium.
The CEO comments on this. London-based Helios, a closely held investment company that focuses on Africa, bought into Interswitch “at a time when Nigeria is getting set for the next phase of growth in electronic payments,” said Elegbe. “We think the partnership will enhance Interswitch’s strong growth within and outside the country,” he said.
According to Bloomberg, Interswitch was established by seven Nigerian banks, four of which still hold shares in the company, including First Bank of Nigeria Plc, Union Bank of Nigeria Plc, United Bank for Africa Plc and Zenith Bank Plc, according to its website. Adlevo Capital of Mauritius and TechInvest Ltd., the holding company of Telnet Nigeria Ltd., also hold stakes.
In 2017, it sold a minority stake in Interswitch to TA Associates, a global growth private equity firm with headquarters in Boston, USA.
“By strategically partnering and aligning its interests with key banks, merchants and other institutions, Interswitch has become a leading provider for payments solutions in an emerging and rapidly growing market in Nigeria,” said Naveen Wadhera, a Managing Director at TA Associates, who represents TA associate on the Interswitch board of director with Ajit Nedungadi a manager partner also with TA associate.
This gave Helios a partial exit in Interswitch. According to reports there was rife at the beginning of 2016 that Interswitch would be floated in a dual listing on the London and Lagos bourses. The company was set to raise over $1 billion from a dual listing on the London Stock Exchange (LSE) and Nigerian Stock Exchange. This plan was put on hold as the TA associate deal signifies that Interswitch owners would rather keep the company private as of the period under review.
Helios Comments on the deal
“For TA Associates to have made Interswitch their first investment in Africa we believe is a testament to Interswitch’s successful growth trajectory to date and the quality and resilience of its brand and business model. We are confident that TA’s domain expertise and global reach will benefit Interswitch as we move forward together in partnership,” said Babatunde Soyoye, Helios’s co-founder and Managing Partner.
Also, 2019 was a very good deal year for African startups, Interswitch made the headline with a Unicorn deal, reported $200M investment deal from the global payment giant Visa for 20% a minority equity stake.
Interswitch founder and CEO comment: “Sub-Saharan Africa is the fastest-growing payments market in the world, with growth driven by a young and dynamic population, rapidly evolving consumer behavior, and an increasing desire for payment solutions that can be accepted across the continent and abroad. I am delighted that Interswitch has formed a partnership with Visa, with whom we plan to drive the next phase of transformation in the African payments landscape.”
Also, Andrew Torre, regional president Cemea, Visa, says: “Africa is a priority region for us, and we continually seek strategic partnerships with local players to further strengthen our leadership position and enhance the payment ecosystem across the continent. This partnership aligns with our global strategy to work with and invest in innovative partners, and we look forward to working with Interswitch to provide new consumer and merchant experiences and support the rapid growth of digital commerce across Africa.”
Let's try IPO
Three years ago when Interswitch announced that on a possibility of an IPO to raise a staggering USD 1 Bn but was canceled, caused by the plunge in the oil market at the time.
July 2019, Interswitch IPO has sounded again. With big plans for a dual stock-market listing in London and Lagos. JPMorgan Chase & Co., Citigroup Inc., and Standard Bank Group Ltd. are were mentions as firms working on a November IPO, which was to place Interswitch at between USD 1.3 Bn to USD 1.5 Bn. With Visa and Unicorn its IPO set.
According to reports, Interswitch’s listing on the LSE is being put on hold “until the middle of next year at least.” As Covid-19 closed markets and stamped economies around the world.
Also, the representatives of Interswitch declined to talk on the indefinitely-postponed IPO. The firm, that has been somewhat coy about its IPO plans, also declined to comment on the new roadmap.
In Feb 2020
The news headlined, Interswitch listing a of ₦23billion Bond on the Nigerian Stock Exchange, what happened to its expected Initial Public Offering. The bond, was issued with the agreement to pay a fixed interest rate of 15% will run for a tenure of 7 years.
“We are delighted with the outcome of our capital raising efforts. We have evolved over the past 17 years into a technology unicorn focused on providing digital solutions to customers in Nigeria and across Africa. We, therefore, see this listing as the first step in a new phase of our journey, and we are determined to keep going.”
Mr. Mitchell Elegbe, the Group Managing Director/Founder Interswitch Limited
With up to 15 million users on quickteller, 32 million consumers make use of its Verve chip and PIN cards, and Quickteller processing over 42 million transactions monthly as of 31 July 2019. The equivalent of more than USD 1.82 Bn.
Interswitch has grown to over NGN 30.8 Bn (USD 85.16 Mn) revenue, as of March 2015 year-end, with 93 percent recurring revenue. Last year, Moody’s said Interswitch posted average net revenue growth of 17 percent from 2017-2019 and an average EBITDA margin of 40 percent over the same period.
Interswitch, like other companies that have been affected by the pandemic, is farfetched to be able to list until 2021. This is because investors will want to gauge any shifts in consumer preferences post-COVID-19 and any examination of quarterly results is unlikely to offer the right guidance at this time. According to Weetracker
The People view.
The digital payment landscape is much a tree and fruit game with Interswitch the tree while other competitors the fruits. But with new players in the fintech space building the next payment infrastructure, how well can they manage this over time?
