The journey of a thousand miles begins with a single step! After twelve years of the startup journey, Cairo-headquartered fintech company Fawry has reached a unicorn status (that is, now worth over a billion dollar!), the first ever by any fintech startup in Egypt and the first ever by any African tech startup going through an IPO (Initial Public Offering) on African soil. Jumia, the Africa-focused ecommerce startup did this in 2019, but that was on the New York Stock Exchange. Interswitch, the Nigerian payment company, also did it last year, but it needed extra funding from VISA to make that happen.
This is a big win for the Egyptian-American Enterprise Fund (“EAEF”), Helios Investment Partners (“Helios”, acting on behalf of funds it advises) and the MENA Long-Term Value Fund (“MENA LTV”)which acquired 85 percent stake in Fawry in 2015 for approximately US$ 100 million.
Fawry Has Proven That African Startups Don’t Need To Look So Far Away For Their IPOs
Perhaps Fawry’s success on The Egyptian Exchange (EGX) would signal a new era for startups on the continent looking to exit through IPO. Jumia’s outing on the New York Stock Exchange still remains a subject of controversy, with Wall Street analysts painting very sad stories about the company, and Africa as a whole.
Fawry went public, last year, August, after months of hype, on The Egyptian Exchange (EGX) in first Egyptian IPO of the year. Fawry offered 36 percent (254.6 million) of its shares on The Egyptian Exchange to raise EGP 1.64 billion ($100 million). The offering also comprised of a secondary sale by Netherland Holding BV. The company’s shares that were listed at the price of EGP 6.46 soared 31 percent to close at EGP 8.48 on the first day of trading, which gave the company a market cap close to EGP 6 billion or $366 million. Since then, its stock price has increased by over 300 percent.
“The private placement was oversubscribed by 16 times and the IPO by 30 times. Egyptians represented 80.3% of the IPO and 50% of the private placement. Arabs & Foreigners represented 19.7% of the IPO and 49.3 of the private,” the Egyptian Exchange said in a statement during Fawry’s IPO in August, 2019.
The latest market cap of over $1 billion came as the company’s intraday trading saw its share price rise to EGP 22.69, resulting in a cap of EGP 16 billion or $1 billion (for the first time). This is remarkable because, with this, Fawry has become the first technology company in Egypt to get to the billion-dollar valuation as well as the first African tech startup to reach a unicorn status through IPO on African soil. Although, Fawry’s stock price fluctuated, the lowest it ever went was EGP 7 per share in March this year, following the outbreak of the coronavirus pandemic.
However, the coronavirus aided the company to achieve its latest status as demand for electronic payment services surged and Fawry being the leading player in Egypt led the gainers’ table. This is also evident from company’s just-announced financials for the second quarter of 2020.
The company reported that its revenue for the first half of 2020 increased by 47 percent (year-on-year) to EGP 549.26 million ($34.41 million) from EGP 373.33 million ($23.38 million) for the same period of 2019. During the said period, the company’s net profit in H1 2020 also increased by over 135 percent YoY to EGP 85.9 million ($5.38 million) from EGP 36.47 million ($2.29) in H1 2019.
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A Deep Heave Of Relief For The 12 Year-old Company
Founded in 2008 by Ashraf Sabry & Mohamed Okasha, Fawry is the only technology company on The Egyptian Exchange and it currently offers over 250 electronic payment services through its network of over 105,000 service points across 300 cities in Egypt – that include ATMs, mobile wallets, retail shops, post offices, and little vendor kiosks.
The company also has its online payment gateway that allows online businesses to collect payments from their customers using different methods including cash, credit cards, and mobile wallet.
In 2014, barely six years after founding, Fawry’s revenue reached EGP 210 million ($13 million), and the company served more than 15 million customers.
Fawry is, however, still working on entering the UAE market, which is expected to be completed by the end of 2020. This will be a breakthrough for the company, given that it will lead to accessing a lucrative payment infrastructure in the Gulf country.
“In 2008, I left my job and had limited time to convince investors that customers would trust paying their bills electronically at a grocery store. The challenge was establishing the company before my financial resources got depleted,” CEO and co-founder Ashraf Sabry said in an interview.
“Overcoming the challenge needed a thorough understanding of the business model, sharing experiences in other markets, committing to invest 80% of my personal financial resources in the same project and, finally, not giving up quickly. [This also involved] … trying to find new investors all the time, until I managed to convince the founder investors,” he added.
“The second challenge was convincing the first biller to join the network; I still remember, it was Vodafone,” he said. “The problem was that Vodafone had to allocate resources to develop the integration with their systems and had to introduce a new competitor to their valuable distribution network, so many of the stakeholders resisted the idea.
“I think I managed to overcome [that] … challenge by deciding to carry the cost of the implementation, to find a champion within Vodafone to support me, [putting together an] … appealing commercial deal and, most importantly, never giving up,” he further said.
“Other challenges include being almost bankrupt after three years, as well as attracting and retaining good people. I think the one factor in overcoming all challenges is, never give up and be persistent,” he concluded.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer