The India division of fintech start-up PayU, and a delivery platform that can get food and grocery orders to customers in just seven minutes; those are some of the businesses that Naspers is betting on in the subcontinent, one of the world’s fastest-growing economies.
India, which seeks to become the world’s third-largest economy by 2027 and double its GDP in the next seven years, is a big pull for investors.
It has a population of 1.4-billion people, just over 40% of whom are considered middle class and 65% of whom are under 35. In recent years growth has averaged 6% a year and GDP will be $7-trillion (about R130-trillion) by 2030. It has the second-largest mobile user base at 830-million, and by 2030 1.1-billion Indians will have access to the internet.
It is no surprise that Naspers subsidiary Prosus has gone on an extended investment drive there, and has plans for more acquisitions.
Investments in India account for 20% of Prosus’s total value; the country is becoming a hub for technology and innovation, boosted by a tech-savvy population, abundant talent and skills and government policies that have created a friendly environment for investment.
India is also considered a mecca for innovation, producing more than 1-million start-ups and creating 111 unicorns in the past eight years alone.
Prosus, which has been in India for 18 years, has invested in technology-based businesses spanning sectors such as education, agriculture, food delivery, software as a service, AI, home cleaning and training. While some businesses are still in the growing phase, others are preparing to list on stock exchanges at home.
“India is our second-largest market and extremely important,” says Prosus interim CEO Ervin Tu.
GDP per capita is at $2,500 and 80% of the population still live in relatively poor conditions, but the government is on a drive for rapid economic growth and urbanisation, aiming to double GDP per capita to $5,500 by 2030.
According to the investment facilitation agency, Invest India, the goal is to cut the proportion of the population that falls in the lower-income bracket from 27.1% in 2022 to 14.7% by 2030.
At the same time, India projects the upper middle-class segment will grow from 33.9% to 43.5% of the population, and that this segment combined with the high-income group will account for half the country’s citizens by 2030.
“There is still a lot of growth, which will come because of [Prime Minister Narendra Modi’s] supportive policy. There is a digital infrastructure push that the government has promoted. There has been a stable set of policies that the government has enabled,” said Tu.
He said the country has an entrepreneurial class that is highly educated, driven and committed to creating great companies.
“Education levels here are second to none. There are a lot of science and engineering graduates and the young folk around the country are more educated and really want to participate in this growth,” he said.
A New Delhi-based researcher said that a fundamental policy shift since 2014 had been a big driver of growth.
There is still a lot of growth, which will come because of [Prime Minister Narendra Modi’s] supportive policy. There is a digital infrastructure push that the government has promoted. There has been a stable set of policies that the government has enabled
— Prosus interim CEO Ervin Tu
“In the past, there was a lot of focus on external liberalisation and India signed a lot of free trade agreements [FTAs], with fewer domestic reforms. The trade imbalance was quite high, which is why the government has reversed it. The current economy is much more sustainable, and they [the government] haven’t gone out and signed too many of these external FTAs, but a lot of progress has happened in the domestic market.”
Notable policy changes include a reduction in data prices, with 1GB selling for less than US20c, making Indian data among the cheapest globally.
The government has enabled everyone to have a digital bank account that can be operated on a mobile phone, with the implementation of a unified payments interface. The platform allows users to link bank accounts to the app for ease of payments, which has been a shot in the arm for e-commerce. The app has become the most popular payment system in India.
The government has also created a digital identification system called Aadhaar, which provides proof of identity and place of residence with a unique number linked to an individual’s fingerprints and facial scans. This means people no longer need to furnish documents for verification when opening bank accounts, among other things, as all their information is stored on the Aadhaar system.
The introduction of a goods and services tax has replaced multiple indirect taxes and improved ease of doing business in India.
Invest India is assisting local companies to access markets and is break monopolies by, for example, creating an open network for e-commerce that links smaller businesses with customers. This is aimed at helping these businesses compete with the big companies.
Corporate income taxes have been cut to encourage companies to set up operations in India.
“Indian companies are no longer just domestic companies focused purely on India. They’re going abroad. We think many of our investors have ambitions beyond India,” said Prosus and Naspers CFO Basil Sgourdos.
In the coming years, some of the companies Prosus has shares in will be ready for listing. One of them is the payment platform, PayU India, which is 100% owned by the tech giant. It expects digital payments to grow 62% to $2.6-trillion by 2030 from $600bn last year.
Tu said Prosus was working hard to prepare the business to list sometime next year. “[It] is a gem in our portfolio with real momentum both on the payment side, which is its historical core, but also on the credit side.”
Another division preparing to list is Swiggy, a food and grocery delivery platform that has added restaurant bookings to its portfolio. It started in 2014 with 35 orders but now processes millions of orders with promised delivery times of between seven and 34 minutes. The company has more than 300,000 scooters on roads across the cities in which it operates.
Co-founder Phani Kishan said Swiggy was able to deliver orders fast because it works with neighbourhood stores, some of them less than 1km from the customer. The company says the Indian grocery market is one of the world’s largest with an annual spend of $600bn and very low online penetration.
“Swiggy is a business with great promise,” said Tu.
“We are very pleased with the improvement in profitability that the company has exhibited while continuing to grow well. There’s still more work to be done, right? We all recognise that and there’s a fierce and able competitor in the form of Zomato in the market.
“But what Swiggy provides, which is the delivery of a fundamental need, food, which people care about and need every single day, that’s the kind of business that we like to back,” he said.
Another company that could be listed is Meesho (My Shop), an e-commerce marketplace serving the most underserved areas and giving exposure to small businesses.
Founded in 2015, it now has 1.5-million suppliers with 95% of products on the platform being unbranded, half of it apparel. The company, whose shareholders include Meta, has introduced a live video stream where creators sell their products to an audience in real time. Its daily orders amount to 3.5-million, dwarfing Amazon’s 3.1-million.
An official who did not want to be named said the new India story is “really moving out of the core metropolitan cities of the country”.
Hubs for innovation and technology are emerging in places such as Hyderabad and Chennai. India is traditionally known to be a software IT outsourcing hub and still has large centres in that domain. But its economy is changing fast.
“We see a large number of innovation centres coming up in electronics, retail, automotive, banking, travel, and going further into other sectors such as semiconductors. So we are seeing a shift. We are doing a lot more that traditionally we would not be doing,” said the official.
• Mochiko travelled to India as a guest of Naspers and Prosus
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