Chinese social networking major Tencent and South African media conglomerate Naspers are restructuring their Indian partnership, in a manner that all from now on, Tencent will operate social businesses in India, while Naspers, through MIH India (Tradus, Gaadi, GoIbibo) will focus on e-commerce. Both parties entered into a fresh set of agreements for their India operations on 10th October 2013. (Hat tip: Jiten Jain)
At present, Naspers’ India business is operated by MIH India Global, of which Tencent holds 19.9%, while the MIH Group (which is controlled by Naspers) owns 80.1% interest. Naspers’ Indian business is broadly categorized into the “Social Network Business” and “eCommerce Business”, and following agreements entered into on 10th October 2013, Tencent will own 80.1% of the Social Network Business while MIH will own 19.9%, and MIH will own 80.1% of the e-commerce business, while Tencent will own 19.9%.
Tencent’s option to acquire 50% (minus one share) in MIH India expired on 17th June 2013. This option was acquired in 2008, when Tencent had announced plans to invest $7.5 million investment in MIH India. MIH India, at that point in time, largely operated largely unsuccessful social networking properties, and following the TenCent deal, launched many Tencent products in India, including mail and messenger, a repurposed QQ browser, and games with virtual currencies. The 2008 agreements – both the shareholder agreement and the agreement that gave Tencent options to buy more stake in MIH – have now been terminated.
This restructuring has taken quite some time: we had written about this potential split back in May 2012. However, do keep in mind
While this restructuring might appear simple, it’s far more complicated because of how MIH India is structured. Upon completion of the India Restructuring, Tencent will own 80.1% interest in the Social Network Business through Tencent Social, which in turn holds 99.999995% interest in 10c India (the remaining 0.000005% is held by TCH Purple, a wholly-owned subsidiary of Tencent). It will also hold 19.9% interest in the eCommerce Business through MIH India eCommerce. Meanwhile, The MIH Group will hold 19.9% interest in Social Network Business through Tencent Social, and 80.1% interest in the eCommerce Business through MIH India eCommerce.
(i) Tencent buying Ibibo’s gaming business operations and the marketing of WeChat: 10c India is principally engaged in the Social Network Business in India. This includes Ibibo games business operations and marketing of WeChat in India. Ibibo Web has transferred the Social Network Business to 10c India in December 2012.
An aggregate consideration for the acquisition is $3,561,850.20 is payable to by Tencent to MIH India Mauritius and $0.20 is payable to MIH India Global. Following completion of the sale and purchase, 10c India will be 99.999995% held by Tencent Social and 0.000005% held by TCH Purple. Tencent Social is not carrying on any business as of the date of this announcement.
10c India will also be assigned trademarks for running the Social Network Business from Ibibo Mauritius, and Ibibo Web will grant it royalty free and exclusive license to use 90 domain names and certain logos.
There is a shared services agreement, as per which, Ibibo Web shall provide support services, including finance, human resources, technical support and administrative services to 10c India for Rs 9,24,000 per month from 1 October 2013
until 31 March 2014, for a maximum of Rs 55,44,000 for the six month term. That indicates that Tencent will have set up full fledged India operations by then.
(ii) MIH India is being restructured: MIH India Holdings is buying 2,484 shares of MIH India Global (which operates GoIbibo, Tradus, PayU and Gaadi Web through its subsidiaries) from TCH Purple, representing 19.9% of its issued share capital, for $2484. Following this, MIH India Global shall be wholly owned by MIH India Holdings.
MIH India Global will assign shareholder loans amounting to $19,447,984 (as of 31st July 2013) owed by MIH India Global to TCH Purple, to its subsidiary MIH India eCommerce.
Before & After
Tencent is setting up independent operations in India, with some initial support from MIH, but from here on, everything will be independently run by the Chinese major: whether it is the social and gaming business on the web, including the QQ browser, or it is mobile apps like WeChat and the One Browser from Tencent. This means that Tencent will be looking to invest and hire in India.
Now that this restructuring is out of the way, Naspers can focus on building its e-commerce businesses further, and perhaps expand its portfolio of e-commerce properties. In fact, Ibibo Web, the company, is being renamed PayU India Pvt Ltd. We might also see more acquisitions going forward, and perhaps some investments in larger e-commerce ventures. Remember that Naspers has invested a significant amount in Flipkart, and acquired Redbus.
Update: (as requested) post the restructuring:
What we’re unsure of: ibibo Ads
Download the document on the restructuring here.
Note: We’ve requested Ibibo CEO Ashish Kashyap for an interaction regarding Naspers plans in India, and will update in case we hear from him.