Bob van Dijk, group CEO of Prosus and Naspers, said the South African conglomerate had ploughed $500 million into India and the country remains its top destination for investments. Van Dijk spoke to ET on several hot button issues like geopolitical concerns affecting technology firms and investors, the Reliance Jio impact, the effects of Covid-19 on its portfolio firms.
Edited excerpts from the interview:
How has the Covid-19 pandemic affected your portfolio companies? What’s your assessment of the impact it will have on businesses now and going forward?
In the short term, which most companies were focussed, the results were very mixed. It also depends on which business line and in which country you are in, as similar business models have done very differently in various countries depending on security measures and lockdowns implemented there. But in the long term, we will see an accelerated shift in people’s behaviour online—whether it is payments, buying products, and delivery services.
But are you seeing recovery happening across various businesses? And how is it different in places like India where the lockdown was far more severe than the rest of the world?
Countries have taken different measures depending on population density, urbanisation and the level of the virus spread. Also, the recoveries have been different depending on supply chains and operational complexities, so it’s very difficult to make broad statements.
What we have also seen across most of our businesses is a fairly solid recovery once the most immediate lockdowns were lifted…In India, we saw a recovery in digital payments and classified but food has been slower.
A big shift is coming in the India technology space with Jio Platforms raising $20 billion in the last three months, leveraging its scale in the telecoms business. What is your view on this consolidation of so much capital in one collective?
If you look at the investments we’ve done in India, it has always been in companies that are great founder-led businesses, which pushed innovation and executed well locally. And in my experience, a lot of value creation happens through innovation and typically by startups…very few large companies manage to truly innovate.
Jio is an impressive company on its own and with the kind of investments it has gotten, it’s even more impressive. But I do think innovation will continue to happen by local entrepreneurs and I think we’ve been extremely lucky in India as we found some of the very best entrepreneurs in the world who have created a lot of value and I don’t see how that changes.
Do investors like you become cautious about backing firms competing with Jio Platforms?
If you’re directly competing with a product coming out of the Jio portfolio then it may be something to scratch your head over, because they are formidable. If I look at our businesses, I don’t think they compete directly with what they run today, so I’m less focused on it.
So, your stand on India investments doesn’t change?
I am nowhere less excited about India and the companies we have backed compared to previously.
What about the new FDI regulations for China investments introduced by the Indian government?
I cannot speak for Tencent, as they make their own investments and decisions. What I can say is, as a foreign investor, we have felt extremely welcomed in India for a long time. We have been able to invest, and there has been support for bringing in capital, as well as knowledge into the ecosystem. We still very much have that feeling of being welcomed.
We have always made sure that we keep the jobs locally, the decision-making locally, the IP creation locally. That’s always been good for us. India has been a top destination for investments, and I think it will continue to be so.
Global geopolitical issues are influencing technology firms and investments. There is a grouping that has been formed of US and China tech, what is your view?
Foreign investors are a great source for stimulating local economies and stimulating growth. Investing has become political, which is a shame, but geopolitical tensions are what they are across the world. We are a global company – neither a Chinese nor a US company – and we have always worked through local entrepreneurs, keeping jobs local which has served us well.
In India, we’ve felt welcome as an investor for a long time – being supported to bring not only capital but also knowledge – and I really want to commend PM Modi and Minister Piyush Goyal (Commerce and Industry Minister) on making doing business easier.
As you mentioned earlier, food delivery has been hurt as a category in India unlike in the US and Europe. What do you make of it as you are the largest investor in Swiggy?
In India, there’s been quite a lot of disruption as a lot of migrant workers went back to where they originally had their families, which led to staffing issues in restaurants. It’s led to big economic turmoil and change, and pressure on business models.
I generally think that delivery models have seen a surge in demand in many places, as it is safer than people running about trying to buy things. But if the entire supply chain gets disrupted then the outcome is different. And I think that’s what’s happened in India and in other markets that was much less the case.
Is it time for consolidation in that space if demand doesn’t recover in the mid-term?
Swiggy has actually made really good progress on unit economics and this sort of efficiency that they’ve delivered makes me really positive about the future. Covid-19 has been painful but we do see that things will recover. Based on the progress that has already been made, I think they can deliver a very healthy business without consolidation.
Over the last couple of Swiggy’s financing rounds, valuation has not really gone up. Do you think broadly India tech will see muted valuations going forward amid the larger economic crisis?
We have been leading the last few financing rounds and have been keen to do so. I would say it’s really been in the best position you can be as we are very convinced backers willing to keep the funding going. We are huge believers of the team and the company.
As for valuations, they go up and in some cases, they don’t. Public markets have been a rollercoaster, and in some cases, it is sentiment-driven. Valuation comes and goes.
We’re an investor in a company with a 10-20-year horizon and we obviously want to make sure we invest in something that is sensible, but the more important part is around the quality of the business.
Your fintech play through PayU faces a lot of competition on both the consumer and merchant sides, how are you evaluating its strategy going ahead? Would you raise external capital?
PayU India is looking to build a broad fintech ecosystem. It has payments, a credit platform, and digital financial services, and they will all be in focus over the years. The big theme for this year will be to actually work more with banks, to deliver a full proposition. The key for PayU will be to deliver omnichannel solutions, to enable merchants to offer more flexible offline-to-online products, and PayU’s market leadership position, which has some of the best technology out there.
We have sufficient capital if we want to accelerate the business, and at this point in time, we are not looking for external investors in the business. But I think, in financial services, partnering is very common and highly value-creating, and we don’t have to do everything ourselves.
Ecommerce in India is a decade-old now, and you were an investor in Flipkart, what do you make of what’s happening in the space in India now with Amazon, Walmart-backed etailer and now, JioMart?
First of all, they can all co-exist. Amazon and Flipkart are trying to fill a space, which is that of a more structured retail setup. That really does not exist (here). That’s the reason why these companies have grown such a lot. They fill a hole in the supply that’s not there in other countries. That hole will remain (here).
The JioMart proposition is also very successful because it solves a very different problem. It’s much more local and a different sort of inventory. Both can co-exist and require a very different logistics setup and technology. I also don’t see if you’re successful at one, how you can effectively compete with the other very easily.
Any bets that you plan to take to be a part of the new ecommerce unfolding in India?
Meesho is a different model, but it’s one I’m very excited about because it’s very suited for the Indian ecosystem. It makes use of ways of interaction that are prevalent and well-suited for the market.
Generally, in some other markets, it’s likely that there are newer models of commerce that will take meaningful volume and share over time, particularly in diverse countries like India, where it’s not a one-size-fits-all (situation). The country is so unbelievably large, diverse and complex, India will probably be the most interesting market from a new commerce model point of view.
Education technology is a big theme for the group, and has done very well during the lockdown… any more investments coming?
Luckily, we started investing early. We made our first investment about five years ago in the space. With the onslaught of the pandemic, we were forced to use new technology across all our businesses. I’ve seen a lot of volume increase on the back of this.
Technology in education is one of the trends that I strongly believe in. People spend a lot of time and money on education, and it’s a real large consumer need, where technology, historically, has not played such a big role. If you look 20 years from now, technology will be everywhere in the way people acquire new skills and knowledge. Between then and now, there will be great investment opportunities.