FOR NILESH Pandya it is a case of when, not if, he becomes the finance director of a publicly-listed company, although he could be forgiven for thinking that the fates are against him after seeing various attempts at two different firms collapse at the last moment for reasons beyond his control.
The most recent setback came at online payments service Skrill, which Pandya joined as chief financial officer in November 2010, when the company was forced to postpose an initial public offering in April 2011 after adverse market conditions provoked unease among potential investors.
Having had previous listing attempts pulled from under him while serving as CFO of Inclarity – a newspaper article suggested the company’s mobile operator would not have its licence renewed scuppered the deal – Pandya has learned to be patient. (Incidently, the operator had its licence renewed for ten years but the damage has already been done.)
“We knew that [losing the licence] was never going to happen but the fund said ‘look we’re cant invest because this is out there in the public domain,” Pandya tells Financial Director. “Going to market changed to being another five year play. At that time I had spent six years here it was now time to do something different.”
After a three year stint at Power Plate International, Pandya says it was time to take a step back and ultimately ask what he wanted to do. Earlier in his career he had spent a couple of years advising on IPOs at HSBC, and it was there that he realised that ultimately he wanted to be the FD of a listed business.
“I saw a number of companies that were growing immensely quickly that had very good management teams taking the companies public and I thought rather than advising I want to be on the other side, I want to be in a company that goes through that,” he says. “I want to be the one that drives that.”
For the uninitiated, Skrill helps consumers make payments simply online. Juniper Research estimates that $250bn of transactions will have been made via mobile devices by 2016. The future will see direct payments, rather than inputting bank details.
In joining Skrill, which re-branded from Moneybookers in the spring of 2011, Pandya joined a company experiencing its own rapid rise. Profits grew 89% a year, from £2.1m in 2006 to £14.4m in 2009. Between 2009 and 2010 revenues increased from £40.2m to £55.5m, demonstrating a compound annual growth rate of 40% over the prior two years supported by a growth in its customer base of 48%, which now stands at over 21 million account holders.
The company’s stunning growth catapulted it to top spot in the Sunday Time’s 2010 Fast Track of the fasted growing private equity-backed companies. However, Pandya says he was not daunted at joining a company exhibiting such remarkable growth.
“I have worked in fast growth companies historically. When I joined Inclarity our revenue was £1m and we grew that to £25m in three years,” he says.
All Pandya has to do now is keep Skrill’s growth story going. And he is confident that Skrill’s growth can accelerate profitably without an IPO, although last April’s planned flotation would have made life easier.
Pandya says that for Skrill to continue to be one of the key players in its market acquiring companies is going to be important. An IPO would have given the business the acquisition capital it needed to fund an aggressive growth strategy. However, it would have other benefits for the company.
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“We had done incredibly well despite people not knowing who the hell we were and that’s interesting in so far of if that’s what we can do when people don’t know who we are, what’s going to happen when they do know who we are? What being listed would have allowed is positive PR to become more known,” Pandya says.
On joining Skrill Pandya immediately pushed the planned IPO back to 2011 give investors the confidence that the CFO and board had settled in. With the team successfully embedded the first week of the road show to drum up support for the listing was ‘fantastic’.
“We had a great first week and in the second week the world just fell apart,” he says. “No one could understand why the IPO market was falling apart but it was.”
The IPO was hit by the perfect storm of unrest in the Middle East, the Japanese tsunami, concerns over eurozone sovereign defaults and the poor performance of several other listings in Europe and Asia.
“There were companies that were coming to market performing that dropped 20% on day one. The funds were saying: ‘ultimately we love to own you but it would have to be on the secondary market or it would have to be a really cheap deal’.
“We were not selling from an exit perspective; it was really to drive PR and acquisition capital. We did not want to spend the next year explaining to the market why we should be rated higher than we are,” he says. “That’s not positive PR, so you are on the defensive and that’s not a great market to raise acquisition capital in.”
Thankfully Pandya and Skrill were in the happy position where the business was cash positive, growing and had alternative means to raise acquisition capital. Simply, it didn’t need to go to the market. Skrill was able to close on acquisition finance from a collection of lenders.
“We are cash positive, we are a growing business and we have got alternative means to raise acquisition capital,” he says. “In December, we closed on acquisition finance, we now have cash to go out and buy companies and these were supported banks so we knew they would make finance available if a bigger deal came round the corner.”
When Pandya joined, Skrill had invested a lot in its platform and service but had overlooked a lot of its back office finance systems. Analysing data was taking too long and systems were unwieldy.
On 1 January, Skrill implemented an Oracle EBS system and spent much of last year building a data warehouse
“It’s been all about getting processes right and about getting the tools right,” Pandya says. “We have a fantastic transactional platform that captures all the data but when you want to run analysis it is a bit unwieldy. You want to be able to make decisions really quickly and so what we were also doing and really pushing along is business intelligence.”
There will come a point when Skrill will want to make more meaningful acquisitions and just tapping into the acquisition finance market will not be enough and the company will need to look at listing again. Pandya thinks the business is in good shape and the appeal is still there.
“Everything that we have done in terms of data warehouse and Oracle, centralising functions makes a massive difference in your ability to be able to predict and project and manage in accordance with that. When you become a public company that key pressure is that your ability to project has is pretty good and we have put the building blocks in place this year allow us to do that,” he says.
“The appeal is definitely out there. I have stayed in touch with the brokers and got the assessment of what the funds still think about the space we are in. Everyone sees this as a huge market.”
Panday says he is not putting any time on launching another IPO and not to ‘bet the house’ on it happening although Skrill “probably would do at some point.”
“When the time is right, there is no reason why we wouldn’t do it. The funds liked us but it has to be the right thing for us to do at the time,” he says. “If we were smack bang in the middle of some key strategic initiative then we might say now is not the time. There is no reason for us not to do it but no requirement for us to do it.”