nimai africa financial services fund · 2020. 10. 28. · nimai capital’s increasing focus on...
TRANSCRIPT
NIMAI AFRICA FINANCIAL SERVICES FUND
NEWSLETTER –
SEPTEMBER’20
KEY HIGHLIGHTS NIMAI NEWSLETTER
The global Pandemic situation is gradually abating & the sentiments have picked up positively over the last couple of weeks amongst governments, professionals,
individuals, family offices & businesses
Nimai Capital has built a healthy proprietary
pipeline of 15 transactions of fast growing & high-quality tech & non-tech FS Companies across Africa. One of the deals is being evaluated for
Warehousing purposes by the Fund
Nimai Capital’s increasing focus on technology investments in financial services space is being
well received by institutional & individual investors
Nimai Capital sees a strong opportunity to invest in Fintechs & Digital Banks in Africa as COVID has
accelerated the pace of digitalization across Financial Services space in Africa. Fintech space in
Africa has seen a lot of activity over the last 12 months, >$1.4 Bn of acquisitions were completed
by larger global players looking to enter Africa
Nimai Africa Fund continues to target the First Close at $25-30 Mn from Investors in Africa, Middle East & India between March – June
2021
Arun Mathur, ex CEO of I&M Bank, have shared his views on the current situation of FS space in
East Africa & pace of digitalization being observed on the ground
Nimai Capital is working towards Warehousing an investment as the first transaction for the
Nimai Africa Fund. Company is one of the leading the Payments & Remittances API
Infrastructure company in Africa
Africa has been very active from Fund raising for Funds & New deal activities between May’20 &
Sept’20. 5 Funds raised capital from international LPs & 8 Companies raised capital from several
local & global Funds
Nimai Capital has added a highly reputable & respectable financial services professional from Kenya, Arun Mathur, the ex-CEO of I&M Bank
Kenya as the Operating Partner on Nimai Capital Operating Partner Board
In one of the major developments in the African
PE space, Canada based FairFax Holdings acquired a majority stake in Helios Private Equity Managers, one of the most successful PE managers in Africa. Deal highlights the growing importance of African
PE amongst global investors
Dear Investors & Friends,
The global Pandemic situation is gradually abating & the sentiments have picked up positively over the last couple of
weeks amongst governments, professionals, individuals, family offices & businesses. The high frequency indicators (HFIs)
such as electricity consumption, employment levels, traffic movements, manufacturing index (PMI), freight index, retail
sales, two wheeler/three wheelers sales, ecommerce purchases are all pointing towards early signs of green shoots in the
global economies. Services sector which comprises of mainly business-to-business activities & business-to-consumer
activities, has also seen some stabilization but mostly on the financial services side than on trade, tourism, hotels and
restaurants space. We believe Africa will probably witness a U-shaped recovery as the African economies are still very
much dependent on external factors such as exports, oil prices, availability for foreign capital etc.
The more we talk to founders & entrepreneurs globally, the more we are convinced that global macro-economic situation
has improved over time. Even though there are second wave of infections in some places around the world which has
resulted in milder lockdowns, the strain of virus seems much weaker & the intensity of the lockdowns is not as severe.
We believe that the world is moving towards a new normal where masks, gloves, social distancing, need based travel will
become a fact of life & this only will subside over the next couple of years.
We at Nimai Capital have been focused on effectively utilizing our time in building our platform. We have spent
considerable amount of time reaching out to new investors in the Fund, onboarding more Operating Partners to the
platform, identifying the Third Partner of the fund who will be based in Nairobi, building a solid pipeline of transactions &
working towards warehousing of the first deal of the Fund.
First an update on the fund raising, Nimai Fund has been actively reaching out to new investors for the fund & have had
various levels of discussions with individual & institutional investors globally including DFIs, Fund of Funds, Family offices
& Banks. Institutional Investors have given a strong positive feedback to the strategy of the fund & wants to engage further
to allocate money to the fund post the first close of the fund. Individual Investors including HNIs & Ultra HNIs have also
shown positive interest in committing to the platform given the increased focus of Nimai Fund on Fintech Investments in
Africa.
Operating Partners: Nimai Capital is very pleased & grateful to share that Arun Mathur, ex CEO of I&M Bank, Kenya has
agreed to join the Operating Partner Board of Nimai Capital. Arun Mathur is one of the most respectable names in the
Banking & Financial Services space in Africa having built I&M Bank from $100 Mn Balance Sheet to more than $2.0 Bn &
with presence in more than 7 countries of Africa during his tenure at I&M Bank. Arun has more than 45 years of rich
experience in the Banking & Financial Services space in Africa (30 years) & India (15 years).
We believe having Arun on Board will provide our portfolio Companies with an incredible opportunity to learn from his
vast experience of building a successful & pristine financial institution in Africa while maintaining an extremely high
standards of Corporate Governance.
Arun’s experience will further complement our richly experienced Operating Partners Board. Adding Arun will also bolster
Nimai Capital’s ability to source high quality transactions in our target markets, gain on the ground relationships &
intelligence, bring substantial value add to our portfolio companies & create impact at scale on the ground in Africa. Now
we have richly experienced professionals from diverse segments like Cards, Payments, Remittances, Insurance on our
platform as Operating Partners.
Additional Partner: We are also in advanced discussions with a couple of senior professionals from Africa to join the Fund
platform as a Partner. We are discussing with professionals with history of relationship with Nimai, deep investment
expertise in Africa, Financial Services experience in Africa & at least 15 years of experience of working with Big 4, DFIs and
or Private Equity firms. We are confident that we will be soon finalizing the third partner in the fund.
Pipeline of transaction: We have shared a detailed summary of pipeline of transactions in the subsequent sections.
Deal under Consideration: From the pipeline of transactions that we have built, we are in advanced stages of evaluating a transaction in Payments & Remittance space in Africa. Companies solves one of the major problems between Mobile Wallets in Africa, interoperability of mobile money wallets. Company, founded in 2010, by an Ex Telecom professional is one of the fastest growing company in API infrastructure space, grown >100% over the last 3 years in transaction value & net revenues. The Company is backed by Marquee institutional fintech investors, esteemed HNIs & Family offices & is currently raising $40 Mn Series C round. Nimai Capital is working towards warehousing the transaction with some of the existing investors of the Fund along with some new investors as co-investors.
With the onset of COVID, the Business World & the Markets have been cast into a scenario never experienced before leading to a change in mindset, behaviour and decision making of consumer & businesses. Countries & Companies were slowly & gradually waking up to the need of moving businesses remote & offering products & services online leading to new technological era “Tech Revolution 3.0”. Digital platforms which were becoming gradually popular and in-demand experienced exponential growth from consumers & businesses working from home & thus compressing 5 years of forecasted growth into 6 months. COVID turned out to be a watershed moment & turning point for online businesses. Traditional businesses also had to shed their inertia towards technology & digitalise their products and services at a breakneck speed. Due to the restrictions in movement and access to facilities the demand for e-services & products grew exponentially. Consumers and businesses turned to various online platforms & remote solutions to conduct their day to day business. Some of the key segments where online demand has increased significantly are borrowing, investing, utility payments, remittances, groceries, health & life insurance, education, gaming, entertainment, healthcare, enterprise SAAS etc. Not only did consumers & businesses preferred to use mobile & cashless modes of payments, it also caused consumers/companies to realise the potential of online products and services. Private Equity Groups also opted to invest in pandemic resilient businesses such as Fintech’s, Ecommerce, Gaming, Edtech, Entertainment etc to diversify their investment portfolios & mitigate downside risk arising from such natural disasters.
CURRENT OPPORTUNITIES
The Investment Manager is excited to share and welcome Mr. Arun Mathur, ex I&M Bank on our Board as our Operating
Partner for Nimai Capital. He one of the most respectable names in the Banking & Financial Services space in Africa having
built I&M Bank from $100 Mn Balance Sheet to more than $2.0 Bn & presence in more than 7 countries of Africa during
his tenure at I&M Bank. Arun has more than 45 years of rich experience in the Banking & Financial Services space in Africa
(30 years) & India (15 years).
The Investment Manager & the Sponsor have participated in various thought leadership events globally as speakers,
panelists & moderators.
Forum Agenda Participants from NIMAI Key Industry Participants
The Forum of Indian Professionals
Exploring the Unexplored Territories
Pankaj Mundra
CA Vijay Gupta, CA Viraj Shah, CA Hari Arora, CA Hansraj Chugh
Nimai Knowledge Conclave
Discover the Leader Inside You
Pankaj Mundra Nisarg Dugad
Sagar Agarvwal Dr. Anil Khandelwal
The Investment Manager has started actively building its pipeline for the Fund. We are working on creating a healthy
portfolio mix of tech & non-tech financial institutions. We are targeting Companies with already existing institutional
backing at early stages, solid management teams, large addressable markets, fast growing companies & potential for Pan
Africa expansion. We are looking at transactions where the Nimai Fund can participate with $5-10 Mn per transaction in
the current round, acquire significant minority stakes & scope for significant value add. Please see below some key
transactions that the Investment Manager is currently evaluating:
Company Description Deal Size Country Source
Company A One of the Leading Digital Payments & Remittances Hubs
in the Africa continent $5-10Mn
South Africa
Proprietary
Company B One of the leading Hire purchase & leasing NBFC in Africa focused on commercial vehicle & equipment
financing $5-10 Mn Kenya Proprietary
Company C One of leading fintech company with a SAAS platform for
managing expenses, payments, AR/AP & accounting management for MSMEs
$2-3 Mn Kenya Proprietary
Company D One of the leading API infrastructure Company allowing
start-ups & businesses to tap into its API network & create customized payment solutions
$5-7 Mn Nigeria Proprietary
Company E
One of the leading B2B platform connecting Merchants with Suppliers directly & facilitating bulk
orders, payments, accounting & logistics $5-7 Mn Kenya Proprietary
Company F One of the leading Neo Banks offering mobile payment
& wallets to unbanked & underbanked. Providing $5-7 Mn Ghana Big 4
TEAM UPDATE
THOUGHT LEADERSHIP
PIPELINE
financial services for >5 yrs by connecting banks & wallets through bilateral arrangements globally
Company G Development and expansion of one of the newest
Securities Exchange, Headquarter at Mauritius. Licensed by FSC and having state of the art technology
$5-7 Mn Mauritius Proprietary
Company H Leading off-grid solar solutions Company that designs, distributes and finances solar home energy kits with
consumer durable products $5-15 Mn India Proprietary
Company I
A company using mobile technology to provide insurance and health services to emerging markets. The company is ranked #10 in the Post, Insuretech Top 100
firms
$5-15 Mn UK Proprietary
Company J A fintech startup bridging the gap between institutional
debt investors and high growth alternative lenders in Africa
$5-15 Mn Kenya Proprietary
Company K
A company that helps small shops and businesses access essential goods & services through the digital economy.
This is done by using unique proprietary mobile data-collection tools, enables informal retailers to order
products at any time via SMS or mobile app and receive free same-day delivery to their store
$5-15 Mn Kenya Proprietary
COMMENTARY ON AFRICA FINANCIAL SERVICES SPACE
Several African countries have introduced various fiscal & monetary measures such as wage subsidies, tax suspensions,
loan schemes, social contributions, support for SME’s, loan payment deferrals, etc. to help minimize the impact of the
pandemic on consumers & businesses in Africa. Majority of the impact is expected to be in the agriculture & informal
segments of the economy which typically comprises of more than 50 Mn businesses & employs more than 80% of the
workforce in Africa.
Small and Micro business have experienced a larger decline in business in comparison to medium and large businesses. It
has been noticed that many such small businesses are unable to sustain without the support of additional resources from
Governments & Banks.
For instance, the government of Uganda has already sought and received a $500 Mn loan from the International Monetary
Fund to provide stimulus measures in the economy. The government is also seeking debt repayment rescheduling, which
would free up to $2 billion for such purposes. Similar efforts are being made by majority of the African governments &
Central Banks.
As a result, the yield curve across Africa for the government debt has ventured in precipitous terrains. The cost of
borrowing has risen significantly against the backdrop of an increase in financial needs of Governments, Banks & Financial
Institutions. Central Banks have been attempting to strategize their actions with the government fiscal support while
preserving their credit ratings & their inflation targets.
Given the frailty of the African economies to external debt requirements and their dependency on international trade and
supply chains, we expect the economies to only gradually recover over time with the support from Multilateral Banks &
International Development Financial Institutions.
BANKS & FINANCIAL INSTITUTIONS
Across the continent, the number of Banks & Financial Institutions are reducing, driven by tightening regulations,
increasing capitalizations requirements, mergers and acquisitions, liquidations and collapses. In Nigeria, only 27 FIs remain
out of 89 that existed back in 2004. Kenya has seen 10 completed M&A transactions in the Banking space and two collapses
since 2016.
In COVID times, Banks & Financial Institutions have taken a back seat in terms of lending to businesses & consumers & are
following an extremely cautious approach towards lending to existing & new customers. On the other hand, Banks &
Financial Institutions in Africa have seen strong increases in Deposits due to reduced consumer spending leading to a
negative charge on net interest margins of the Banks.
Majority of the institutions have parked capital in government Bonds & securities thus reducing the overall Return on
Assets on the Banks portfolio. Since Central Banks in Africa have forced moratoriums on the Banks, the gross NPA situation
currently seems under control, however, the actual underperformance & write off on the Books will only be visible by the
end of the moratorium period. We expect Banks & Financial Institutions to tread cautiously till the first quarter of 2021.
The need for social distancing and cash less transactions has even forced traditional Banks and other Financial Institutions to digitalise products & services in an effort to retain customers, improve consumer experiences, remain relevant and adapt to the onset of the changes in circumstances. Businesses that were investing in strategic, operational and financial digitalisation are better positioned to respond, recover or sustain in the current scenario.
Insurance Sector in sub-Saharan Africa has also been impacted due to COVID, however, given that the Insurance
penetration in Africa is considerably low, the impact at scale in comparison to the economy is relatively lesser.
Insurance companies are registering decline in both top line and bottom line largely due to traditional modes of
distribution, higher health & business claims & low investment incomes. The rising number of health insurance claims is
also leading to increase in premiums and forcing insurance companies to tighten their belt to sail through the storm.
On the investment side, Insurance companies in Africa have opted for a more conservative capital protection investment
opportunities as compared to global insurance companies that actively invest in various asset classes & diversify their
balance sheet globally.
Digitalization, sachetisation, pay as you go models & disintermediation of the broking industry are creating opportunities
for newer players to take market share from existing traditional players. Insuretech companies are using Mobile, AI, ML &
IOT to source customers directly, underwrite & price policies better, create consumer focused & need based sachet
products & automate claim settlement processes.
Given that there is a large untapped potential in the insurance tech space in Africa & big insurance players in the EU market
have set their eyes on either expanding, partnering, acquiring or merging with these smaller/local insurance or reinsurance
companies in Africa thus creating opportunities for Private equity funds to exit their existing insurance investments.
Africa has become one of the most important fintech markets in the world today. It has increasingly become the focus for
most of the large global Fintech players in the world & they are on an acquisition spree in Africa. With four major
acquisitions in the last 12 months totaling to the north of $1.4 Bn+ puts Africa ahead of most emerging Fintech markets
in the world in terms of Mergers & Acquisitions, Stripe from US recently acquired Paystack (Domestic Payments API
Company from Nigeria) for $200 Mn+, World Remit from London acquired SendWave (Money remittance player from pan-
Africa) at $500 Mn, Network International from UAE acquired DPO (Domestic Merchant acquiring payments platform from
Kenya) for $288 Mn & MasterCard from US acquired HomeSend (Interoperability Payments & Remittances API from
Belgium) for approximately $376 Mn.
INSURANCE PLAYERS
FINTECH PLAYERS
This bodes well for most early stage Fintech companies, Entrepreneurs & the early backers (PE & VC Funds) of these
Fintech Companies. The entrepreneurs who are building solutions in payments space, remittances space, lending,
insurance, investment & savings etc now have a clear option to build large companies & eventually exit them to right long-
term partners.
Fintech has become a very attractive sector today globally & an important allocation for most funds, banks & institutional
investors as a vast majority of consumers are still unbanked, under banked & underserved due to factors such as lack or
service, inertia towards technology, accessibility, affordability, user experience, user classification, etc. This has created a
unique space for fintech players to take advantage in stepping up and addressing the key issues faced by business &
customers alike & provide solutions which solve their problems & also create significant value in the ecosystem in the
process.
Growing smartphone usage and demand for cashless transactions is creating a perfect recipe for Fintech’s to thrive in
Africa.
Arun Mathur – Ex CEO of I&M Bank. He is one of the most respectable names in the Banking & Financial Services space in Africa having built I&M Bank from $100 Mn Balance Sheet to more than $2.0 Bn & presence in more than 7 countries of Africa during his tenure at I&M Bank. Arun has more than 45 years of rich experience in the Banking & Financial Services space in Africa (30 years) & India (15 years). We believe having Arun on Board will provide our portfolio Companies with this incredible opportunity to learn from this vast experience of building a successful & pristine financial institution in Africa while maintaining a very high standards of Corporate Governance. “Being the perennial optimist, I would like to start off by saying that the way people have adopted the new normal in most
countries in Africa has been really commendable. And, there lies our strength in being able to adapt to new technology
and the ever-increasing tech companies that are providing a very valuable service across all sectors. In countries such as
Kenya Rwanda Uganda and many others, families are making huge sacrifices in ensuring children have access to remote
learning. Within the confines of curfews and area wise lock downs corporates are rotating staff to keep essential services
going and trying their level best to avoid layoffs to the extent possible. As the pandemic enters the 6th month horticulture
exports are showing encouraging trends. In the absence of foreign tourists’ local tourism has taken off and growth in
digital banking has shown an increase of up to 30%. While it is still difficult to predict when we will see the light at the end
of this long tunnel, I am sure the Almighty must be very pleased how his flock on the continent has faced up to this latest
challenge.”
INDUSTRY FEEDBACK ON AFRICAN FINANCIAL SERVICES
INVESTMENT ACTIVITY & KEY DEVELOPMENTS IN PRIVATE EQUITY &
VENTURE CAPITAL IN AFRICA
Fund Group Description
African Rainbow Capital Sanlam is due to sell 25% stake in its new black-owned asset management company to
Patrice Motsepe’s African Rainbow Capital (ARC)
Kuramo Capital Kuramo Capital has committed to further invest $5 million in the third-party fund
manager
Novostar Ventures The Nairobi and Lagos-based investment group announced it has closed $108 million in new commitments to launch its Africa Fund II, which brings Novastar’s total capital to
$200 million
Sanari Capital Sanari Capital’s backed by 27four, has made its first investment of $1.5 Mn into
LightWare
Secha Capital Secha Capital closed Fund 2 with $30 Mn in commitments from investors globally
Company Description Deal Size
Syked An e-health startup company based in South Africa has raised an undisclosed seed
funding round to scale operations across the country and expand its offering Undisclosed
Yellow
Solar Energy Start up pay-as-you-go (PAYG) has raised $3.3 Mn Series A funding round to expand it services to over 100,000 customers in Malawi and Uganda. it also plans to look at broader opportunities its digital distribution platform offers, in consumer items
and financial services
$3.3 Mn
Valenture Institute
A tech-enabled high school launched by Getsmarter co-founder Rob Paddock in South has secured US$7 million in funding for growth globally
$7.0 Mn
TradeSafe South African based online escrow platform startup, has raised an undisclosed amount
of funding from Standard Bank in return for a 35 per cent equity stake Undisclosed
VALR One of South Africa’s leading cryptocurrency exchanges has raised $3.4 Mn to advance the adoption of cryptocurrencies. The Series A equity round of funding was led by 100x
Ventures, 4DiCapital, FNB CEO Michael Jordan and US-based company Bittrex $3.4 Mn
ProfitShare Partners
Intech SME capital provider, ProfitShare Partners has secured $5 Mn from the SA SME Fund. With this funding, the company looks to partner with small and medium
businesses to help accelerate growth for SMEs $5.0 Mn
Okra Nigerian Fintech platform Okra “Super Connector” secured $1Mn pre-seed fundraise
from TLcom Capital. With the first API in Africa to retrieve Realtime financial data from a bank account to any web or mobile App
$1.0 Mn
Chipper Cash
African cross-border fintech startup Chipper Cash has closed a $13.8 Mn Series A funding round led by Deciens Capital. Chipper Cash offers its mobile-based, no fee, P2P
payment services in seven countries: Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa and Kenya
$13.8 Mn
INVESTMENT IN AFRICAN PRIVATE EQUITY FUNDS (May’20-September’20)
KEY INVESTMENTS INTO COMPANIES (May’20 – September’20)
Company Update
Helios Fairfax Partners
Fairfax Africa has entered into a definitive agreement to merge its complementary Private Equity businesses with Helios Private Equity. The company would be renamed Helios Fairfax
Partners Corp. upon deal closing which is expected to occur in Q3
OPay Opera Payment wallet (OPay) teams up with WorldRemit to extend its mobile money transfer
services to over 50+ countries
iWire Technologies
iWire Technologies a Digital Transformation company based in the UAE has partnered with Capturs Systems – GPS Tracking system company to expand their services across Middle East,
Asia and Africa regions
Network International
Dubai-based digital payments group operating across the Middle East and Africa has announced that it will be acquiring Nairobi-based DPO Group for $288 Mn
WorldRemit WorldRemit a global cross – border payment company has announced its agreement to acquire
Sendwave - a rapidly growing app-based remittance company in a cash and stock transaction that is expected to close by Q4 2020
KEY COMPANY UPDATES (May’20 – September’20)
PERFORMANCE OF LISTED FINANCIAL SERVICE COMPANIES IN GHANA
Market Cap (GH
Mn)
CMP (KS)
3 months Price
Change (%)
1 Yr Price Change
(%) NIM
Current P/B
Current P/E
ROE
Banks
GCB Bank Limited 955 3.60 -19.6% -27.3% 5% 0.46 2.98 23.0%
Ecobank Ghana 2190 6.78 -8.9% -19.7% 4.7% 0.92 4.22 25.0%
CAL Bank Limited 401 0.64 -8.5% -36.0% 7.5% 1.72 2.44 14.4%
Standard Chartered Bank (Ghana) Limited
2020 15.00 -11.7% -21.0% 7.8% 1.56 6.50 25.6%
Agricultural Development Bank
1520 5.06 N/A N/A 6.6% 1.43 33.16 4.3%
Trust Bank (Gambia) Limited
68 0.34 N/A +54.5% 5.4% 0.83 5.59 15.0%
Société Générale Ghana Ltd
445 0.63 -3.0% -13.7% 22.2% 0.56 3.50 17.0%
Ecobank Transnational Incorporated
1680 0.07 N/A -22.2% 4.7% 0.18 1.31 13.0%
Access Bank Ghana 764 4.39 N/A +46.3% 3.9% 0.95 4.40 24.2%
Republic Bank Ghana Limited
340 0.40 -18.0% -38.4% 10% 2.07 20.58 10.7%
Mean -7.0% -8.0% 7.78% 1.07 8.46 17.0%
Insurance
Enterprise Insurance company
238 1.40 -6.0% -12.5% N/A 0.89 6.76 14.2%
State Insurance Company 20 0.10 N/A N/A N/A 0.60 9.63 6.4%
Mean -3.0% -6.0% N/A 0.70 8.19 10.0%
Other FSC
Mega African Capital Limited
60 5.98 N/A N/A N/A N/A N/A N/A
Stanchart Preferential Shares
15 0.87 N/A +1.15% N/A 1.60 6.15 7.8%
Mean N/A 1.0% N/A 0.80 3.08 4.0%
Note:
The data above is derived from various sources ranging from 2019-2020 data.
Data calculated above are based on assumptions and estimation and may/may not match actual figures.
Data mentioned has been calculated from unaudited sources.
CMP is as of 30th September’20.
DISCLAIMER
This Newsletter is prepared for information purposes only & does not constitute an offer. The market data in the
presentation has been taken from sources we believe to be reliable; we do not guarantee its accuracy or completeness.
Unless otherwise stated, all statements, figures, graphs & other information included in this presentation are as of the
date & subject to change. The information contained herein shall not form the basis of any contract or invitation.
Recipient should not construe any of the contents herein as an advice relating to business, financial, legal, taxation or
investment matters & are advised to consult their own business, financial, legal, taxation and other advisors.
THANK YOU
NIMAI CAPITAL
PANKAJ MUNDRA, CEO & MD, NIMAI CAPITAL
SAGAR AGARVWAL, CIO & MD, NIMAI CAPITAL