Africa’s largest company just chalked up another major investment coup. Naspers has netted a cool US$1.6bn profit from the sale of its 11% stake in Indian e-commerce startup Flipkart, a deal almost as lucrative as its sale of Polish online auction site Allegro in 2016.
The move helps to line the pockets of the media and technology company, which is scouring the globe for investments to convince shareholders it’s on the right track.
With its roots in South African newspapers, Cape Town-based Naspers hit the jackpot 17 years ago with a speculative punt on then-obscure Chinese company Tencent Holdings. The initial $32m outlay is now worth almost $150bn — and that’s after Naspers sold off a chunk of the Internet giant for almost $10bn six weeks ago.
The problem is that investors value the whole of Naspers at less than its Tencent stake, suggesting they see every other part of the business as worth less than nothing. And that’s where the likes of Allegro and Flipkart come in. CEO Bob van Dijk has vowed to close that valuation gap, and unlocking cash from the company’s myriad other investments helps to do just that.
“With this sale our return on cost of capital was almost three times — it’s been one of our better investments,” Van Dijk said by phone on Wednesday. Naspers retains several other Indian businesses, including online classifieds business OLX, food delivery firm Swiggy and travel business MakeMyTrip, and remains heavily committed to the country, he said.
However, there’s a suspicion that Naspers wasn’t the one driving the decision to sell. Walmart, the world’s biggest retailer, is buying a 77% stake in Flipkart for $16bn, and will be calling the shots henceforth. Walmart declined to comment.
“I am sure Naspers was sort of bullied out of the shareholding,” Petri Redelinghuys, founder of Herenya Capital Advisors in Cape Town, said by phone. “Walmart made it clear that they did not want all the major shareholders to be part of the deal. There was potential for Naspers to make a lot more money with Flipkart.”
With the US giant as majority shareholder, Naspers’s influence on Flipkart would have been significantly reduced, Van Dijk said in response. “Our investment would just have become a financial investment. And Naspers is not a financial investor, it’s a strategic investor,” he said.
No matter. The sale shows that Naspers can still pick a billion-dollar winner — even if it never replicates the success of Tencent. Naspers shares rose 0.7% to R3 096 at 4.50pm in Johannesburg, valuing the company at R1.4 trillion.
Naspers bought into Flipkart in 2012 and has invested a cumulative $616m. The sale value of its stake was $2.2bn (R28bn).
“The main objective for us continues to be to find the right opportunities that will be really big in terms of consumer use,” Van Dijk said. “We back those entrepreneurs and make sure we make the right returns.” — Reported by John Bowker and Loni Prinsloo, with assistance from Thembisile Dzonzi and Janice Kew, (c) 2018 Bloomberg LP