Naspers-PayU, Tencent eye stake in Pine Labs
While Pine Labs does not have a high cash burn, the additional capital raised will help it expand in the lending space.
The company has also held talks with Caisse de depot et placement du Quebec (CDPQ), one of the largest pension funds in Canada, among other investors as the process is still in early stages, said the second source mentioned earlier. Pine Labs has hired JP Morgan to manage its capital-raising process. Interestingly, while the discussion with Tencent and CDPQ is for a minority stake, the Naspers-PayU combine are evaluating a majority share purchase in Pine Labs, which has expanded into Southeast Asia besides India.
Pine Labs, PayU and CDPQ spokespersons declined to comment on “rumours” and “market speculations”. Emailed queries to Tencent did not elicit a response till the time of going to the press.
While Pine Labs does not have a high cash burn, the additional capital raised will help it expand in the lending space. It already offers working capital loans and the company also set up a unit called Pine Labs Finance earlier this year.
Pine Labs had raised over $200 million from US payments giant PayPal besides financial investors like Temasek, Actis and Altimeter Capital last year. A large part of this was spent earlier this year to acquire online gift cards company Qwikcilver earlier this year for $110 million.
Sequoia Capital India remains the largest shareholder with a 40-50% stake, and a potential exit from the company is being seen as a “deal which returns the entire fund” by those tracking the firm. But if and how much stake Sequoia will sell remains on the final contours of the deal. Sequoia has already made a partial exit when Paypal and Temasek invested $125 million in Pine Labs last year and most of that transaction was secondary.
The interest in Pine Labs remains high as fintech has emerged as the hottest segment for both strategic and financial investors this year. “Naspers-Payu are aggressively looking for deals after the listing in Amsterdam of the new holding company,” said the first source. Naspers hived off its investments, which includes companies like Swiggy and Byju’s in India, into a new company called Prosus and listed it last month with a market capitalisation of over $115 billion. India is the largest market for Payu, accounting for over a third of the revenue at $127 million in financial year ending March 2019 with a total payment value of $15 billion during the period.
Tencent has also been building its portfolio of financial technology startups in India this year as it tries to counter the moves of e-commerce giant Alibaba, a rival in home market China. Tencent has already made earlystage bets on neo-banking startup Niyo and Khatabook, which digitises accounts of small businesses. It is also in the process of investing in Etechaces, which owns financial services for insurance and personal finance called Policybazaar and Paisabazaar, as TOI reported in July.