While many companies struggle to cope with the immediate impact of the Covid-19 pandemic, Singapore-headquartered business-to-business (B2B) payments unicorn Nium continues to grow both organically and inorganically, as it manages to leverage on pandemic-driven digitalisation.
From a digitalisation standpoint, the height of the pandemic was a pivotal moment, pushing a society used to bricks-and-mortar stores towards the digital world, says Nium co-founder and chief operating officer Pratik Gandhi. “The corollary of this is that payments had to be made online. And whenever there was a cross-border element to it, that is where someone like us comes to play. It provides a huge fillip to us as well as the entire digital cross-border payments industry.”
Additionally, while other companies conserved cash to stay afloat, Nium made several “important acquisitions” during the pandemic. This helped the company to expand its resources, capabilities and client base, allowing it to strengthen its business proposition.
For instance, in July 2021, Nium acquired Wirecard Forex India, a foreign currency exchange, prepaid card and remittance service provider which has 23 branch locations across the country. The acquisition provides Nium with an extensive reach throughout India, at a time when the country’s prepaid card market is expected to boom at a CAGR of 40.5% between 2021 and 2026.
The acquisition of Wirecard Forex India was Nium’s second in just over a month after its acquisition of UK-based Ixaris, a payment optimisation company which has offices in London and Malta. Ixaris introduced Europe to virtual credit cards for travel payments back in 2014 — which have since become the industry standard. The company issued more than 10 million virtual cards in 2019 and had processed a total payment volume of GBP5 billion since its inception as at July 2021.
This year, Nium is still in full inorganic growth mode, having recently acquired Socash, a Singapore-based alternative payments network platform. Socash allows its customers to deposit, withdraw and make payments with cash from more than 30,000 merchants. This acquisition allows Nium to accept cash for transactions online, enabling multiple forms of local payment acceptance for digital commerce.
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“Today, we are a truly global company, supporting over 190 countries, 100 of which in real time. Our licence portfolio currently covers 11 of the world’s jurisdictions.
“Europe used to be one of our weak areas — this changed with the acquisition of Ixaris which allows us to have a stronghold in the region. That is the power of a good acquisition, it can actually catapult businesses like ours into another zone very quickly. We are very happy that we did the right acquisitions at the right time,” says Pratik.
He adds that the company is on the lookout for more acquisitions, having the financial capability to enable such deals. Its CEO Prajit Nanu was quoted in April as saying that Nium plans to make an acquisition worth up to US$400 million ($569 million) to drive expansion in the European continent.
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Pratik says: “If (the deal amount) goes beyond the amount of money that we have in the bank, we can always raise more funds. Many of our investors, as you know, have deep pockets. So we can always tap the market again.”
No push or pull factor
Nium was founded as Instarem (short for instant remittance) in 2014 with the aim of providing a transparent service for overseas money transfer with close to live exchange rates. In March 2016, it raised a US$5 million series A round led by Temasek’s Vertex Ventures with participation from Fullerton Financial Holdings (another Temasek subsidiary) and German venture capital firm Global Founders Capital. Proceeds from the fundraising were used to acquire licences to handle money transfers in more markets. Other investors at various points in time include Visa, US-based private equity firm Riverwood Capital and Kasikornbank’s venture arm Beacon VC.
After several more funding rounds involving new and returning investors, Nium announced in July 2021 that it had raised over US$200 million in series D funding. With that, the company crossed the US$1 billion valuation to make it the first B2B payments unicorn from Southeast Asia.
Pratik says that the company’s run rate is US$100 million per year, adding that the company is growing at 2x to 3x every year. While the company is capable of going on a public listing at the current stage, Nium does not have a firm IPO timeline as there are no strong push or pull factors to do so, he says.
“Typically, companies get into the markets for various reasons. One could be to raise money, another could be that the existing shareholders want an exit. We are not necessarily in the market to look for additional funds — we have a strong balance sheet. Our investors are also not looking for an exit at the moment, wanting to partake in the high growth we are bringing them,” explains Pratik.
When the time is right, however, Nium will be looking at a primary IPO in the US, before a secondary listing in Singapore. Pratik says the company has been “courted” by a number of special purpose acquisition companies (spacs) but his preference is to list — if and when he does — via a regular IPO route.
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“There was a time when it may have made sense for some companies to use a structure like that, because there was a very clear arbitrage between the regular IPO and a spac in terms of the regulations and the speed to market, among others. I think that arbitrage has been taken away now and it has lost its appeal, while regulators have also wised up and have increased regulatory scrutiny.
“Additionally, the spac performances have been so dismal. The reputation of the whole concept has gone down so much that people like us wouldn’t touch it with a bargepole,” says Pratik.
According to a report by law firm Skadden published on Sept 21, the first half of 2022 experienced a slowdown in spac activity — only 77 despac deals were announced in the first half of 2022, compared to 167 despac transactions in the same period of 2021. This year also had the highest number of withdrawn spac deals on record, with 143 spac IPOs withdrawn and 46 despac transactions terminated through the end of August.
The slowdown in activity can be attributed to numerous factors, which includes disappointing performance by newly despac-ed companies, rising inflation, macroeconomic uncertainties and regulatory tightening.
Continuing momentum
Currently, Nium is focusing on expanding its list of licences, with an eye on the African and Latin American markets. It is also developing its alternative payment methods business, in an effort to not be limited to bank to bank payouts.
“Our customers want the ability for the payment to happen in any way, be it connectivity with wallets or wanting us to accept cash on their behalf — which is our plan behind Socash’s acquisition.
“We are also working on facilitating crypto. Some of our corporate customers with fairly large consumer bases may want to provide them with the ability to buy crypto — this is something that we can do. To clarify, we would not be handling the crypto, we would only be enabling it,” says Pratik.
Having benefited from the pandemic-driven digital payments adoption, will there be a possibility that Nium’s growth would plateau as the catalyst fizzles out? Pratik believes that the company would be able to continue its growth momentum, amid the backdrop of other companies with weak hands eventually consolidating.
“I also think there will be a lot more opportunities for a strong company like us to acquire a few companies within the space. Plus, we are a solid company with a strong balance sheet and war chest. We have also spent the past few years building our company with the right talent, hiring a lot of senior roles, on top of investing in new geographies and licences,” says Pratik.
