FINTECH company M-DAQ has entered into a definitive agreement to buy Wallex, a business-to-business crossborder payments provider with licences in Hong Kong, Indonesia and Singapore.

The deal size was undisclosed. The acquisition is expected to be the first in a series for M-DAQ as it expands its business ahead of an initial public offering in 2-3 years.

M-DAQ will inject S$7 million of working capital in Wallex - for a runway of at least a year - to work towards a 25 per cent year-on-year revenue growth, said head of corporate and finance strategy Jeremy Sng, a veteran investment banker who joined in December to oversee acquisitions and fundraising.

The transaction with Wallex is subject to closing conditions and regulatory approvals.

M-DAQ in August raised around S$200 million from Asian private equity firm Affinity Equity Partners. Its other investors include Ant Group and EDBI.

The company's core product Aladdin allows e-commerce and other digital platforms to offer multicurrency payment options to customers, while letting merchants receive their preferred currency through a guaranteed foreign exchange rate.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

This means customers can view and purchase goods in their home currency, and merchants can price goods in multiple currencies while minimising exposure to foreign exchange risk. Since its launch in 2016, Aladdin has processed nearly S$30 billion in crossborder transactions, said M-DAQ.

Following its acquisition of Wallex, Wallex will continue to operate independently; and the startup's chief operating officer and co-founder Hiro Kiga will be appointed the new chief executive.

Wallex was founded in Singapore in 2015. It raised a Series A round in 2020, led by Ant Financial-backed venture firm BAce Capital and Indonesian venture firms SMDV and Skystar Capital. Data provider VentureCap Insights puts the amount raised at US$4.87 million.

Wallex's customers can convert and pay in 46 currencies, collect payments via virtual accounts and hold funds in a digital wallet.

The startup's customisable application programming interface (APIs) helps fintech companies tailor their crossborder offerings based on Wallex's infrastructure.

The platform supports nearly 2,000 banking and technology clients, which are mostly startups and small and medium enterprises.

Wallex said it recorded a 5.5 times growth in its annualised revenue over the past year, but did not provide figures for growth based on actual full-year revenue.

It added that it processes almost S$4 billion in gross transaction value (GTV) annually. M-DAQ said the combined entity is expected to process more than S$15 billion in GTV this year.

M-DAQ's topline took a hit in 2020 after the pandemic slowed down crossborder trade as buyers turned to the domestic market following global supply chain disruptions. A bulk of M-DAQ's business comes from the Alibaba ecosystem, including AliExpress and Tmall.

Revenue for the year ended December 2020 fell 40.7 per cent to S$27.1 million. The company booked a net loss of S$4.7 million, reversing from a net profit of S$2.5 million the year before.

Sng said the business recovered last year, with GTV growing 59 per cent and revenue growing as well. But the company has yet to return to net profitability and is investing in new products and services, he added.

M-DAQ is diversifying out of the Alibaba ecosystem, which used to account for about 90 per cent of the company's transactions. Today, it accounts for about two-thirds. M-DAQ's other clients include JD Group, onboarded in March 2021.

Still, about 80 per cent of transactions managed by M-DAQ's core product are from the e-commerce vertical.

"We will be targeting new verticals this year across e-commerce retailers, e-commerce platforms, airlines as well as online travel agencies. With things picking up from Covid-19, we expect there to be an increased level of crossborder commerce and travel," said Sng.

READ MORE:

• Singapore fintech M-DAQ bags S$200m in Series D funding round

• Fintech startup Wallex raises Series A funding from BAce Capital, SMDV, Skystar