Will Interswitch still be the company that brings Sub-Saharan Africa its big tech windfall?

In 2016 it appeared Africa would produce its first big tech IPO on a major stock market.

As reported in TechCrunch, Nigerian fintech firm Interswitch — which provides much of Nigera’s digital banking and payments infrastructure — was poised for a dual listing on the Lagos and London stock exchanges at a $1 billion valuation. The company had selected investment bankers, had support of primary backer (Helios Investment Partners), and things seemed ready to go.

Nearly two years later, neither Interswitch nor any other VC backed African tech company that began in startup phase gone public.

What happened?

Why the delay and when?

An Interswitch spokesperson told TechCrunch it was “unable to comment regarding the pending IPO.”

The company’s given some clues in statements over the last year. In late 2016, Interswitch’s then CEO Mitchell Elegbe told Bloomberg, “The macroeconomic situation in Nigeria is the determining factor’’ in delaying the plans―referring to Nigeria’s recession and currency slump, both of which have now largely abated.

In a September 2017 interview, Interswitch Divisional Chief Executive Officer Akeem Lawal named “unfavorable equity markets” and reaffirmed an IPO, saying “It will happen before the end of 2019.”

Will Interswitch be first to list abroad with a bang?

TechCrunch checked in with a couple of Nigerian tech insiders on Interswitch’s prospects to become Africa’s first big IPO — and the possibility another venture could beat them to it.

On reasons for the postponement, Paga CEO Tayo Oviosu thinks, “It’s the macroeconomic situation…the volatility of the Naira, and wanting that to stabilize. I don’t think there’s anything else that’s delayed it,” he said — noting the Nigerian economy and Naira improved in 2017.

Oviosu added that 2016’s slumping Naira would have adversely impacted any IPO valuation or opening share price, especially for a foreign listing.

“They would have been valued lower than where the investors would like to be,” he said.

On timing for an Interswitch public listing, “They’re gearing themselves up to go back and do an IPO. My sense is it’s probably not next year, more likely the year after,” Oviosu told TechCrunch.

Omobola Johnson — Nigeria’s former Minister of Communication Technology and Senior Partner at TLCom Capital — thinks Interswitch is still ripe to go public. “In 2016 the markets just weren’t right. But if you look at Interswitch as a company since, it still continues to do well,” she said.

“Interswitch is still growing, it’s still profitable, and it still has significant market share in Nigeria and other African markets. So in terms of the fundamentals as a company, they are still very strong to be the [continent’s] first significant tech IPO,” Johnson said.

With analysts and Interswitch timing an LSE listing for 2019, there’s the prospect of another VC backed African tech company going public with first.

While Omobola Johnson believes Interswitch still has the best chance, she named a couple other IPO candidates in the near 3-5 year future. “I’d look at a company like Andela, which is growing very quickly and has raised significant capital,” she said, referring to the Pan-African coding accelerator that recently sealed $40 million in Series C funding. Johnson also named Kenyan online grocer Twiga Foods and Nigerian fintech startup Flutterwave as future IPO contenders.

Paga CEO Tayo Oviosu still sees Interswitch as the best African prospect to go public on a major exchange, given their financial performance.

He played down―but did not completely rule out — the possibility of his company (one of Nigeria’s leading digital payments firms) going public. “I wouldn’t say never. I think for us our exit strategy would be to go public or a strategic sale, but none of those things are in the works now…we want to continue building our business,” Oviosu said.

He believes African tech companies will need to meet a higher revenue standard before satisfying investor criteria for IPOs.

“I think in Africa, it comes down to your EBITDA,” he said, referring to the financial metric measuring revenue performance before certain expenses.

“In this market, I would value a company that is EBITDA positive much more than someone just telling a good story.”

So it appears a high value African tech IPO on a major exchange is imminent and it’s still likely to be Interswitch. If it does list, it would likely become the continent’s second unicorn, behind e-commerce venture Jumia.