Helios sells stake in Interswitch

Helios Investment Partners, the Africa-focused private investment firm managing funds worth up to $3 billion, has sold a minority stake in Interswitch to TA Associates, global growth private equity firm with headquarters in Boston, USA.

Announcing the deal on its website, 2017, TA Associates (the acquirer) said that the deal will not affect Helios’ majority shareholding in the integrated digital payments and Commerce Company. The acquirer did not disclose the financial terms of the transaction.

This deal came at a time when many had expressed the fear that Nigeria’s currency travails may have hindered private equity investment in Africa’s second largest oil producer. Multiple currency environment and ‘command and control’ approach by the Central Bank of Nigeria (CBN) to bolster the country’s currency, the naira, has made it difficult for investors to realise their investments, pushing the country out of the list of investment destinations.

“By strategically partnering and aligning its interests with key banks, merchants and other institutions, Interswitch has become a leading provider for payments solutions in an emerging and rapidly growing market in Nigeria,” said Naveen Wadhera, a Managing Director at TA Associates in the statement announcing the deal.

“Interswitch is a unique, high quality and strategic asset located in one of Africa’s leading economies. We are delighted to expand upon our longstanding presence within the global payments industry through our partnership with the management team and Helios, and look forward to helping Interswitch continue to expand its business.”

Wadhera and Ajit Nedungadi, Managing Partner at TA Associates will represent the acquirers in the Interswitch Board of Directors.

McKinsey & Company had reported that the digital payments evolution is in the early stages of development in Nigeria as the people use cash for up to 99 per cent of transactions compared to 50% for developed markets in North America and Europe.

Interswitch occupies a leading position in the emerging marketplace, especially in debit cards that comprise 99 per cent of all cards in the country.

McKinsey said in its ‘Digital Finance for All: Powering Inclusive Growth in Emerging Economies’, that digital payments could have a huge impact on Nigeria’s gross domestic output (GDP).

“Lower-income countries such as Ethiopia, India, and Nigeria have the largest potential, given their low levels of financial inclusion and digital payments today,” McKinsey said.

The sale gives Helios a partial exit from its investment in the digital finance company, which it first made in 2011. Speculation had been rife in the beginning of 2016 that Interswitch would be floated in a dual listing on the London and Lagos bourses. It is presently valued at over $1 billion. This plan may yet be put on hold as the deal signifies that Interswitch owners would rather keep the company private in the interim.

Interswitch was founded in 2002, enjoying significant market share in Nigeria presently. It owns and operates Verve, the country’s principal domestic credit card scheme. It also serves as a third-party transaction processor for many of Nigeria’s biggest lenders.

Many public and private sector institutions use Interswitch’s business-to-business (B2B) electronic payment services as well as Quickteller, the company’s business-to-consumer (B2C) bill payments and digital commerce platform.

“For TA Associates to have made Interswitch their first investment in Africa we believe is a testament to Interswitch’s successful growth trajectory to date, and the quality and resilience of its brand and business model. We are confident that TA’s domain expertise and global reach will benefit Interswitch as we move forward together in partnership,” said Babatunde Soyoye, Helios’s co-founder and Managing Partner.