Fintech Nium eyes more M&A deals on path to IPO

Singapore

HOMEGROWN fintech Nium last year bought 2 companies - UK travel payments specialist Ixaris, for £15 million (S$26.69 million) in cash, and an Indian unit of fraud-hit Wirecard for an undisclosed sum. And it may not be done shopping.

The company, which recently doubled its valuation to US$2 billion, is looking at 3 to 4 potential deals at any one time, co-founder and chief operating officer Pratik Gandhi told The Business Times (BT). Latin America is especially of interest for Nium, amid its plans for a US initial public offering (IPO).

"There is a huge amount of complexity in the way that the different countries work," he said, citing how there are varying regulations and payment systems across the continent - similar to the fragmented South-east Asian market. It is such messiness that Nium seeks to solve via its one-stop "banking-as-a-service" proposition to businesses, with cross-border payments and card issuance solutions.

The 8-year-old startup is assessing various possibilities for the Latin American market. While one option is to start from scratch, it could more easily acquire an existing company that has not done well, for reasons such as a lack of funding. "As long as we are comfortable that it's a clean company, there are no skeletons and management is good, we prefer the M&A route," Gandhi said.

Nium is not looking at distressed valuations per se, since post-pandemic recovery is already in motion.

Started in 2014, Nium was originally a consumer-focused remittance service called Instarem, but rebranded 3 years ago as it shifted gears into enterprise payments. It serves financial institutions, such as Thailand's Kasikornbank, as well as corporates like Singtel and small and medium enterprises (SMEs).

Besides Singapore, the company also has key offices in San Francisco and London. It holds regulatory licences in 11 markets, including Australia, Japan and India, and has over 1,000 employees in about 17 countries.

While its focus has been on going global, Nium could also be looking at deals on its home turf. In February, it was said to be in talks to acquire SoCash, a smaller Singapore fintech that converts shops into cash withdrawal points, according to a DealStreetAsia report.

Gandhi declined to comment on specific targets. He added that Nium's deal sizes could range from very small to very large; the latter type might even require more funding support.

"The valuation could be so large that it needs another set of funding. That only means that either it's a merger of some sort or we go out into another funding round specifically for this. There is no cookie cutter approach to this," he said.

Eye on IPO

Nium's M&A appetite comes as the company moves towards an IPO. Chief executive Prajit Nanu said last July that Nium planned to go public in the United States in 18 to 24 months, possibly followed by a secondary listing in Singapore.

But Gandhi told BT that the timeline could vary depending on the IPO market, which he acknowledged is in a tough period. The company is also not looking at a merger with a special purpose acquisition company (SPAC), a listing vehicle which he reckoned has lost its sheen.

Nium's M&A focus could beef up its topline. Back in 2020, BT reported that Nium was aiming for US$100 million in revenue by 2023, which Nanu had said would mark the right time for listing.

The company posted S$22 million in revenue for FY2020 ended December, according to regulatory filings. Excluding other income from the reclassification of preference shares, its net loss stood at S$24.2 million.

Gandhi declined to share Nium's financial figures since then, which are not publicly available yet. But he said that the Ixaris and Wirecard Forex India acquisitions are showing positive results, with timing and pricing that "played perfectly for us".

The Ixaris deal, announced last June, has led to the United Kingdom contributing significant revenues. Nium has traditionally earned the bulk of its revenue out of Singapore.

Ixaris, which also has a presence in Malta, provides flexible funding and payment methods for airlines and online travel agents. Nium took on its 86 employees and rebranded the business Nium Travel.

Then in July, Nium announced that it would purchase Wirecard Forex India. Gandhi would only describe the sum paid as "very, very little for the value that we got".

Despite the downfall of its parent Wirecard, the unit had a decent business in forex, prepaid cards and remittance services. It had 23 branches across India and 190 staff, all of whom Nium vowed to take on.

On the back of this deal, Nium is launching its own branded travel cards in India. It is targeting the upwardly mobile segment of the Indian population, who would use such cards while abroad. The Wirecard unit, rebranded as Nium Forex, broke even just a month or two post-acquisition, Gandhi said.

"The reason is not that there is a magic touch that we have given to it. It's just that the core business they were a part of, that itself rebounded; they are also part of the travel (segment)," he explained.

Private to public

Nium shot into the regional spotlight last July, when it topped the US$1 billion valuation mark - or unicorn status - after raising over US$200 million in Series D funds. Its backers include US tech investor Riverwood Capital, state investors Temasek and GIC, payments giant Visa and Vertex Ventures.

Since February, Nium has also raised US$8 million from entities including Moore Strategic Ventures and AS Angel Investment III, data platform VentureCap Insights shows. Notably, the latest shares were issued at a price that values the company at US$2 billion, double from the prior fundraise. Gandhi confirmed the latest capital injection but declined to share specifics.

Sustaining investor excitement from the private markets into the public markets could be Nium's biggest challenge ahead.

South-east Asian tech listings have seen weak sentiment thus far. Grab and PropertyGuru, which listed via SPAC mergers, have fallen over 70 per cent and 25 per cent respectively since debut, as of Friday (Apr 1).

Asked how Nium will stand out from global peers like Wise and Stripe, Gandhi said that its unique selling point is its single application programming interface, as well as quick integration for customers. "If you give the right story to the investor, backed up by figures, we believe that there is always an appetite."