Naspers undaunted by Russian setback

Almost 18 months after the Kremlin’s invasion of Ukraine led to a hurried exit from Russia by many international companies, Naspers says it is bullish about its operations in Eastern Europe. 

The group’s international unit Prosus — which invests primarily in fintech, classifieds, food delivery and education — is one of the biggest listed companies in Europe. Its investments on the continent including Germany’s Delivery Hero, Netherlands-based payment service provider PayU and eMAG, the largest online retailer in Romania. 

“What we have in Eastern Europe is actually really good businesses,” Bob van Dijk, CEO of Naspers told Business Day. “We have the classifieds business in many parts of Eastern Europe with eMAG that’s strong. We feel good about Eastern Europe as it is.

“But there’s obviously a big question, and it’s one for the world: how is this war going to develop?” Van Dijk added. 

In May 2022, the group moved “to cease all involvement in its Russian operations” three months after Russian troops invaded Ukraine. 

“The invasion of Ukraine has really been painful for us,” Van Dijk said. “We had a big business in Russia with Avito [the classified advertisements website]. It was actually one of the star assets in the portfolio. We had big operations in Poland, in Ukraine, in Romania. It was just not sustainable to be the owner of a big business owner in Russia. So we had to exit.”

Goodbye Russia

In May 2022, Prosus — which had an effective interest of 99% in Avito — announced its intention to exit its Russian classifieds unit and concluded the sale with Russian businessman Ivan Tavrin, the CEO of Kismet Capital Group, in October that year.

“We worked really hard. We did it. Probably better than any other company in Russia. We ended up with a decent price. We lost some money but the overall investment was largely saved. So painful but a decent exit,” Van Dijk said.

Ultimately, Avito was sold to Tavrin’s Kismet Capital Group for 151bn roubles, about R45bn at the time. 

The group had 4,000 employees in Russia through Avito. Prosus parent company Naspers bought out Avito’s minority shareholders in a 2019 deal worth about $1.1bn. In early 2022, the unit had been thought to be worth $6bn. However, Prosus says Avito’s net asset value of Avito was $1.379bn in March, and it recorded a profit of $160.3m in the latest financial year end, before selling. 

Prosus’s decision to abandon the Russian unit followed pressure from activist groups in Ukraine. An organisation called the Ukrainian PR Army recently launched a scathing attack on Prosus’s failure to terminate or suspend its links with the Russian classified ads website.

In addition to exiting Avito, Prosus wrote down its $769m stake in Russian social networking platform VK Group and vacated its board seats. 

VK — previously known as Mail.ru — owns a platform known as VKontakte, touted as Russia’s answer to Facebook. VK is listed on the London Stock Exchange but is controlled and run in Russia. The writedown came after VK Group CEO Vladimir Kiriyenko was added to a US sanctions list after the Russian invasion of Ukraine.

Value proposition

Undaunted by these developments, Naspers continues to push for profitability from its $30bn e-commerce portfolio by the first half of 2025.

Revenue from the division for the full year to end-March 2023 grew 7.7% to $6.8bn (R125.9bn) excluding M&As, with food delivery, payments and fintech being the biggest contributors. Still, the operating loss widened 40.5% to $1.4bn (R25.7bn).

Naspers said its core classifieds business delivered “sustained growth and improved profitability through stable operating metrics and strong performance in Europe”.

iFood, Delivery Hero and Swiggy saw strong growth and profitability during the period. iFood’s core restaurant businesses reported a 14% increase in gross merchandise value (GMV) and a 24% increase in revenue. Delivery Hero's GMV grew 18% and Swiggy’s 58%.

GMV refers to the value of goods sold via customer-to-customer or e-commerce platforms.

The group is on a mission to prove the value of its portfolio beyond its investment in Tencent. That, in combination with a suite of other transactions, major acquisitions, and the largest share buyback in JSE history is expected to close the valuation gap, long a sore point for investors.

At the same time, Naspers is expected to push through a proposal to simplify its business with shareholders in the coming months, having announced the end of its complex cross-holding structure.

The plan will see Naspers and Prosus issuing shares to their existing shareholders, and both companies will waive their rights to participate in the respective capitalisation issue of new Prosus or Naspers shares.

Once done, Naspers’s ownership in Prosus will align with its economic ownership of 43%.

gavazam@businesslive.co.za