Dubai-based Network International piqued investor interest in April when it floated on the London Stock Exchange in Europe's biggest IPO listing. David Wigan reports.

Rohit Malhotra

Rohit Malhotra

Network International is at the intersection of some of the most exciting trends impacting global business, including technology, e-commerce and emerging marketplaces. It is the leading digital payments solutions provider in the Middle East and Africa, which puts it in the sweet spot of probably the most disrupted activity in global finance. It came as no surprise, therefore, that when the company launched its initial public offering (IPO) on the London Stock Exchange in April 2019, there was a rare sense of excitement among bankers and investors.

The Dubai-based company, founded in 1994 as a subsidiary of Emirates Bank, is growing fast in one of the world’s most under-penetrated payments markets. The company has a presence across the payments value chain in more than 50 countries. Unusually in the payments industry context, it works with both card providers and merchants. The company’s £1.1bn ($1.38bn) IPO was the biggest listing in Europe in 2019.

“We are both enablers of financial institution card services and work on the acceptance side,” says Network chief financial officer (CFO) Rohit Malhotra. “It is very unusual to do both meaningfully but we have built the business mainly organically through our strong technology and various wraparound products and capabilities.” Over the past 10 years, Network has seen 14% annual top-line growth.

More liquidity, higher profile

Network’s business is highly cash generative, and given its focus on organic growth, it may seem a little strange that it decided to leverage the capital markets. The reason, however, had less to do with funding the business than offering its major shareholders, Emirates NBD, Warburg Pincus and General Atlantic, a chance to sell part of their shareholdings. The move was also designed to provide increased trading liquidity in the company’s shares and raise the group’s international profile.

“We are cash accretive and have never done much external funding, save for one acquisition,” says Mr Malhotra. “However, we wanted to give our shareholders an opportunity to realise a return and we wanted the broader investment community to be able to participate.”

Company executives had been thinking about an IPO and putting in place the necessary structures and frameworks over several years. However, it was only in the third quarter of 2018 that the board made a definite decision. It spoke to banks in September, with the help of Citigroup, which had been its financing partner on the earlier acquisition.

In the end, the lead advisor group comprised Citigroup, Emirates NBD, JPMorgan and Morgan Stanley, along with Barclays, Goldman Sachs and Liberum Capital. Evercore advised on the listing. London was chosen as listing venue because of company connections in the UK capital and the city’s leadership in fintech and payments. 

Given Network’s relatively low profile, a significant task for the executive team ahead of the IPO was to engage with investors. Between October 2018 and the April listing, the company’s managers held a range of meetings, analyst days, roadshows and presentations. 

“We knew a lot of people were curious but did not really know our story, so we spent a lot of time engaging with investors and answering their questions” says Mr Malhotra. “We really did a lot of that but it was necessary so that investors had a good understanding of our proposition.”

Mid-range pricing

The hard work paid off because as soon as books opened in early April, orders started pouring in. On the first day the book was fully covered and over the next 10 days or so the orders kept on coming. Along the way, banks tightened the price range for the listing, but demand remained steady. At the time of pricing, the book was covered 10 times.

“I am pretty sure we didn’t lose any investors as we tightened and we ended up pricing at 435p, which was in the middle of the range,” says Mr Malhotra. “Our aim was to raise a decent amount of money but also to offer investors the value they were seeking.” 

Network International sold 200 million shares for 435p each, valuing the company at £2.18bn. The share price jumped 22% on the first day of trading and was higher still by mid-June. Mastercard was a cornerstone investor after buying an additional 49.95 million shares. After selling its stake, Emirates said it owned 25.5%, with Warburg and General Atlantic owning 24.5%.

“As a CFO, the IPO was one of the most exciting periods of one’s professional journey,” says Mr Malhotra. “There was a lot of work across multiple workstreams to get there, and to put in place the right people, policies and infrastructure, as well as the right partners. Anyone who says you can do these things without stress is not telling the truth, but in the end I was quite happy about the way it panned out.”

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