Naspers Limited (NPN.JO) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Prosus Naspers Update Call. [Operator Instructions] Please note that this call is being recorded. I'd now like to hand the conference over to Eoin Ryan. Please go ahead.

Thanks, operator, and hello, everyone. Thanks for joining us today. Yesterday evening, we issued an update on our response to COVID-19 pandemic. And outlined the actions we are taking to safeguard our employees, customers and businesses and to support the communities in which we operate. Following that, we thought it'd be useful to host this call with you today to give you further context and answer any questions that you might have. On the call with me today is our CEO, Bob van Dijk; and our CFO, Basil Sgourdos. We also have our CEOs of our core operating segments, Martin Scheepbouwer, Laurent le Moal and Larry Illg on the phone. And they'll join in for Q&A. Bob and Basil will walk you through the key points, and then we'll open up the call for Q&A. And to kick things off, I'll hand this over the Bob. Bob?

Yes. Thanks a lot, Eoin, and welcome, and thanks to everybody for joining us today. So to say that we're living in tough and unprecedented times, I think, is an understatement here. And the actions that were taken just a month ago to counteract the spread of COVID-19 out of an abundance of caution are now being taken worldwide out of an abundance of necessity. So we really are in unknown territory and almost all aspects of our daily lives have been disrupted, and the global economy has been sent towards recession. So with that context, I want to begin this call with my best wishes to you, so wherever you are in the world, and I really hope that you and your loved ones are keeping safe and healthy. So as we are operating in this temporary new normal, my leadership team and I are in constant communication with our businesses, as you can imagine. And while it's still too early to quantify the size of the impact of the virus on our operations, it is clear that we're not immune, and like all other business in the global economy, we are being negatively impacted. But I think it's important to state upfront that the fundamentals of our businesses remain very strong, and Prosus is well positioned to weather the storm. We believe that we have sufficient liquidity to run the company, even in the worst-case scenario, and we have the ability to invest in our businesses and other potential opportunities that may present themselves during this period. We also know that there will come a time that COVID-19 will no longer be our most pressing problem. That will be a great day indeed and Prosus will be prepared for it. We issued a statement last night, as Eoin referred to, and the details of the impact on the business. But we thought it was important to also have this call to give you our perspective directly, both on the impact of the pandemic and the actions we are taking to emerge from it even stronger. So our focus now and always is on 3 things primarily. So first, we are prioritizing the health and the well-being of our people and the communities in which we operate. Second, we are ensuring that we safeguard our customers, but also our partners and the businesses we run. And third, we are making sure that we're backed by a strong and liquid financial position. Before I get into the detail, I would really like to take this opportunity to thank all our employees, who have responded magnificently and adapted very quickly to this crisis. So most are working from home and they're adapting to this new way of working. And for some people, it means combining work with home-schooling for their kids or with the distraction of everyone being under one roof 24/7. And for others, it's dealing with isolation. So we're supporting our teams wherever we can, and I'm just amazed by the spirit and determination of this group. It is really inspiring to see people rally, and it's clear that this crisis is bringing the best out of people across the Naspers and Prosus family. And that's something I'm actually really very proud of. So now let's talk about our partners and the societies we operate in. Now as a global consumer Internet group that operates in local markets across the world, I believe we have a responsibility to the communities we serve that goes actually beyond ensuring the health and well-being of our people and running our business well. So I'm very proud that last week we were able to confirm to the President of South Africa that we will be contributing ZAR 1.5 billion of aid to support his government's response to the COVID-19 crisis. And he included our support in his address to the nation on last Monday evening. And South Africa is a country that's close to our heart. It's where Naspers was founded. We've operated there for over 100 years. We have several thousand employees there, and we remain the most valuable company on the Johannesburg Stock Exchange, and that's the home of our Naspers' primary listing. South Africa is also a country that is particularly vulnerable to a pandemic like COVID-19, and it is vital that we play our part in the response. As you know, we operate in many markets across the world, and we have been considering carefully what support we can provide to countries beyond South Africa where our support would really make an impact. And India is one of those countries. So we have significant investments and operations in India that employ many thousands of people and they sustain the lives of many thousands more, and we serve millions of people in communities across the country. Now at the group level, we're finalizing our support for the COVID-19 response efforts underway in India. But additionally, all of our Prosus family of companies in India are contributing to the efforts underway, whether through donations of their own or through support activities linked to their business models, for example, and free meals for people in need. This is something I'm encouraging all of our businesses to do across the world, and many of our businesses are well placed to make a difference in the response to COVID-19 and they're rising to the challenge, which is really very inspiring to see. So we have detailed what our businesses are doing in our main segments in the statement last night, so I will not rehearse that in detail, but we're seeing action across the entire portfolio. So our education technology companies are a good example of what is possible. So in many countries, you know, in most countries, schools, colleges, universities have been shut down, and that presents a very real disruption to student's lives. And this is an interesting time for EdTech companies and it's actually turning out positive for most of them. And beyond the natural increase in interest in educational technology products, they are using their platforms to provide additional support. So the Codecademy team were ready to respond early when it came to COVID-19. So Codecademy launched a scholarship program, offering 10,000 free pro scholarships. And at the last count, the company has awarded, in fact, more than 85,000 scholarships and it shows a huge demand for these. And Brainly is also taking significant steps to support their community of parents, teachers and students wherever they can, and now Brainly Premium is being offered for free in the key markets. So the bottom line is that we do -- we're doing a lot to help communities in which we operate and our partners. It's the right thing to do and doing the right thing generally generates a great return over the long term. So now let's discuss what impact the virus is having on our businesses. But before the onset of the virus process was and in the transformative years -- year with strength in operations actually everywhere in the portfolio, we've seen strong revenue growth, profitability was improving in our classifieds and in our core payment businesses and our investments in food were beginning to show real returns. And while that performance reflects operations in a different set of circumstances, it is reflective of the core underlying trends of the businesses we operate. So we will continue to invest in these businesses that we expect will be back on this positive track when conditions improve. And when you look at the geographical and operational diversity of process, you will see that we're well placed to perform in a recovery. So our largest investment, Tencent, continues to perform well. And Tencent, as you know, is a key part of our value and its dividends are an important component of our free cash flow. Structurally, our businesses are well positioned, and we are now 100% online group following the unbundling of the MultiChoice Group last year. And if you look around, all of our businesses are benefiting from strong secular shifts in online behavior and changing consumer consumption patterns. And it's likely, we will look back at this moment in history, really as an inflection point where these trends were just accelerated. So from a top-down perspective, we have a great set of businesses, and they are well capitalized. But as I mentioned upfront, no business is immune from the effects of this pandemic in the short term and that we are no exception. So I would like to walk you through what we're seeing across the portfolio right now. So in classifieds, all of our major markets are in or close to a lockdown. And as a result, we've seen a significant drop in traffic to our properties, which, of course, varies by property, but for the most part, it's down approximately 30% to pre-COVID traffic. We expect car and property verticals will see a meaningful hit initially, and that's basically because people don't spend their money there in times of crisis, people postpone that typically. Furthermore, there are unprecedented levels of uncertainty, and it will also mean that people hold on to their core assets until they feel more comfortable. So we're taking action to help our consumers and our partners during this difficult time. For example, we're providing delivery services when possible to alleviate the needs for our customers to meet face-to-face, while we're also providing financial relief to our partners to allow them to remain in business. The reality is, however, that when people are forced to stay inside, trade will drop meaningfully. In Poland, specifically, the business has given paid listers advertisement extensions for 30 days, while Otodom, which is our real estate offering in Poland has reduced the price of paid advertising by 50% for April and May. So we remain leaders in most of our classifieds market, and we are very confident the actions that we are taking will solidify our position there and will make our business be better set up for an eventual recovery. Similarly, in Russia, Avito is taking steps to aid partners by offering discounts to its professional customers ranging from 25% to 30%. So the bottom line is, we'll see in the short term, a negative impact on revenue, but that will have a lower impact on trading profit and cash flow due to the nature of our cost base. And Basil will speak more about that later. So in payments and fintech, PayU continues to benefit across its markets worldwide from large secular trends showing more customers moving and transacting online and also more online transactions sell through alternative forms of payment rather than with cash. However, our most significant market, India, that actually represents more than 50% of our volumes, entered into a full lockdown on March 25. So transaction volumes dropped initially by approximately 50% and are now starting to recover. Meanwhile, our business in Europe and in Latin America has proven to be very resilient, and it's actually growing up to 36% in the last week. And this is driven by some larger e-commerce players benefiting from the shift to online in our key markets like Poland, Turkey, Romania and Colombia. It is still too early to assess the full impact to the business in India, but we are confident that PayU is well positioned as e-commerce recommences online, thanks to the solid portfolio of very large e-tailers. Our non-listed food delivery businesses, Swiggy in India and iFood in Brazil, are seeing varying impacts on their business. So while we're seeing actually an increased demand for food delivery everywhere in our portfolio, but at the same time, we're experiencing some supply issues in some markets as restaurants close. And we're working with our restaurant partners and restaurant associations to restore supply, while we're thinking of creative ways to add further supply to our cloud kitchen infrastructure. So in India, Swiggy is permitted to continue to operate. But the implementation of the lockdown has varied across the country, and service has been stopped in some regions. And this has materially impacted the business. So demand is generally solid, and the total number of visitors to the platform hasn't changed much despite the fact that we reduced marketing. But the number of restaurants on the platform has gone down significantly. And many of the restaurants are currently inactive as many have shuttered their doors post the lockdown. Separately, Swiggy is working on building out its offering in grocery and dairy delivery, and we're seeing meaningful increases in orders there. For Naspers, specifically in South Africa, although food delivery is allowed as an essential service, restaurants and their kitchens are barred from operating, and that limits the items that Mr D Food can deliver. And Mr D Food is, however, continuing to operate in a limited capacity through the deliveries of essential goods, where they will use contactless delivery and hygiene protocols to make sure they can do it safely. Finally, and in contrast, in Brazil, small restaurants and high-end restaurants are looking to iFood for a solution to keep their doors open during lockdown, and while it's still early days, we're seeing significant new and organic demand. So longer term, we believe it's likely that the current environment will drive a structural shift in consumer consumption patterns in favor of delivery service in general and food delivery, in particular, and we continue to invest in that opportunity. If I go to etail, while eMAG's main market of operation, which is Romania, entered the lockdown on March 26, the business has held up remarkably well, although we'll continue to monitor how it develops. For Naspers, specifically in South Africa, Takealot has been impacted by a restriction on the categories it can sell. But it's still too early to determine the size of this impact, and the business has rallied rapidly to broaden its offering into the nonrestricted categories. And finally, in our ventures portfolio, our largest collection of assets sits in the EdTech space, that I mention earlier -- mentioned earlier, and as you can imagine, with students all over the world now studying remotely, this is space that's doing very well. So before I'll turn the call over to Basil to go through in a bit more detail the financial impacts on the business and our flexibility to operate in all circumstances, I wanted to extend my thanks once again to our employees, to our partners, but also to you, for your continued support of Naspers and Prosus. So I know times have been very difficult for you, both personally and professionally, and I really appreciate you taking the time to be here with us today. So as I mentioned, the day will come when this pandemic will not dominate all aspects of our daily lives. It will pass and some normalcy will come back. And in the meantime, Prosus will continue to do as it always does, and we will look for opportunity and we're sure that opportunity is to be found in the current environment. And with that, I will turn the call over to Basil, and later, look forward to any questions you may have. Over to Basil.

Thank you, Bob, and hello, everybody. I'm here to echo Bob's best wishes to you and your loved ones. Thank you all for joining us on the call today. As Bob mentioned, our teams have been hard at work. This is a rapidly developing situation with no room for complacency. We continue to actively assess the impact and take appropriate market-specific action as needed. We are ensuring our businesses receive the right attention to be able to return to normalcy when the time comes. Bob has already spoken about [Technical Difficulty]

Ladies and gentlemen, please remain on line. We are just waiting for Basil to reconnect.

Hi, everyone. Sorry, we had some telephone troubles. So let me try and pick up where we left off. So as Bob mentioned, our teams have been hard at work. This is a rapidly developing situation with no room for complacency. We continue to actively assess the impact and take appropriate market-specific action as needed. We are ensuring our businesses receive the right attention to be able to return to normalcy when the time comes. Bob has already spoken about the impact the pandemic is currently having on our businesses. It won't be significant, but we are poised to weather the storm. So I will spend some time focusing on our flexibility to mitigate some of the impacts. But before I do, I want to underline once again that Naspers and Prosus sit in an enviable situation from a financial perspective, and I believe this will be a real differentiator for the group during the current environment. We have modeled to the best of our ability the potential impacts of this global pandemic on the group across a number of scenarios. This analysis is driven by what we know now and will be updated as we learn more. Our worst-case scenario assumes a recession that will last a number of quarters. While the worst case could result in a meaningful near-term financial impact in the context of the annual numbers, we don't expect that will have a meaningful impact on the balance sheet and the liquidity of the group. I'm confident as the CFO that we have sufficient liquidity to weather even the worst-case scenario, while also preserving some flexibility to invest in our businesses and do M&A as opportunities present themselves. We have over $8 billion in cash and debt of $3.5 billion. So net cash of $4.6 billion at the end of March. We repaid our bond, which was maturing this July, using the proceeds from a new 10-year bond of $1.25 billion, which was well-priced at a coupon of 3.68%. This transaction was completed late in January this year. Not only are we paying a materially lower interest rate and also boosting our firepower in the process, but the timing of this bond now turned out to be quite fortuitous. Our 2 other bonds mature at 5 and 7 years out and have no restricted covenants. We also have a $2.5 billion revolving credit facility that remains through 2025 and is undrawn. So all in, our balance sheet is strong as is our liquidity profile. We continue to review our debt capacity in the context of COVID-19 and given our ambition to remain investment-grade rated. Should we find good M&A opportunities that require funding beyond what we have now, raising further debt as market conditions continue to improve is an option we can consider. Now I think it's worth spending a moment to talk you through what you think about the cost structure of our businesses in an environment where revenue is challenged for some. I will also discuss how we balance the near-term impact against the long-term desire to invest in and grow our businesses. As you would expect, we are looking at budgets closely and at our cost structures of each of our businesses to ensure that they are rightsized for the on-the-ground situation. These are unprecedented times, and we continue to assist as needed. We have a fair amount of variable costs, which we could reduce, if needed. But again, we are a well-capitalized group, and we will not cut to the bone for the short-term if it impedes strategic progress over the long term. Importantly, we have a good deal of financial levers we can pull, although the variable cost base varies by segment. In general, in food delivery, the cost structure is quite flexible and can be adapted quickly to changing circumstances. There is relatively little capital expenditure and the largest fixed costs, those associated with the technology platform. Although much of variable costs at this stage of the model's maturity are the marketing investment associated with demand generation. These can be quickly dialed up or down to fit market conditions or changes in strategic direction and are tied directly to the revenue we generate. We also have some flexibility on 1P logistic operations, which are designed to be somewhat adaptable to consumer demand. In classifieds [Technical Difficulty]

Ladies and gentlemen, please remain on line.

Thanks. Sorry, again, folks. [indiscernible] So I was saying, in classifieds, we have a large fixed cost base. As part of this fixed cost base, we do have a meaningful marketing investment. That is a lever we can use and, of course, are using right now. Certain marketing campaigns and events are already being postponed. In the convenient transactions part of the classified business, we can dial our investments to drive growth down to reflect the current conditions. We also have a large proportion of temporary workers, which creates more flexibility, should the impact become more severe. However, based on what we see today, we have taken the view to do the right thing during this challenging time to protect employment. This also enables us to accelerate our competitive position and to get up and running immediately after the crisis. In our payments business, processing costs are the largest costs and are directly tied to volumes. So lower volumes means lower costs. [indiscernible] costs are fixed in the short to medium term. And finally, in etail, a large portion of the cost base is, of course, cost of goods sold in volumes, and therefore, revenues come down. [Technical Difficulty]

In the interest of time and because Basil has a poor line, I think Basil had one more important point to make, which I will make on his behalf, and then we move into Q&A. So I think Basil -- typically -- are you back Bas?

Yes. Yes. I'm back. I'm using a backup line. So hopefully, this will now work 100%.

I was about to steal your thunder. So go ahead and continue.

So finally, I was talking about etail, I think I was talking about the fact that the largest cost base is cost of goods sold. And of course, when volumes drop, revenues decline and gross margin comes down. But then there's also a very limited marketing cost in those businesses given the very strong brand and position. And as I said, as Bob has explained, the eMAG has the limited impact and Takealot has stretched, it's still evolving. We are also working on deploying capabilities to categories most least such as food and groceries. As we come out of the lockdown, these businesses will benefit from the accelerated structural shift to the online [ because of ] COVID-19. So before I close, a quick word on capital allocation. We do get lots of questions on capital allocations and buybacks. You have seen that recently, we completed a $1.5 billion share buyback program at the NASDAQ [indiscernible]. We are constantly looking at the best way to deploy capital. And as Bob mentioned, we expect the current environment to present the group with significant opportunities to do this in value-creating ways. It's important that we act responsibly and in a manner which conserves our optionality. Finally, a quick word on our year-end process. As you know, our year-end was March 31, and we were working hard with our workers to remain on track for our results announcement . Right now, we are on track. But aside from the limitations for Prosus of teams working from home, COVID-19 creates meaningful additional work, which is further complicated by the level of uncertainty. We are currently operating. So we remain selective and will be sticking to our deadline, but should things change, we'll come back to you and give you an update. So with that, firstly, I'm sorry about the line trouble. But thank you for your time for joining us today. And now we expect your questions. So if I can hand back to the operator for questions.

[Operator Instructions] Our first question is from Cesar Tiron of Bank of America.

I have 3 questions, if that's okay. The first one would be on food delivery. Just wanted to understand if you expect this crisis to lead to more consolidation, probably similar to what we've seen in Colombia this week or maybe even something of a larger scale M&A? Second, also on food, we -- actually, I wanted to discuss the competitive environment in India. And if you believe that Zomato is as impacted as Swiggy by the supply issues, which you mentioned. And probably a broader question, do you think that some of your competitors will not be able to sustain the type of investment that you will be in the current environment? And then finally, last question, I wanted to ask about online education. There's been a couple of headlines on your appetite for this vertical. Do you think this cluster can become as large as classified food or payments over time?

Yes. Thanks, Cesar, for your questions. So I'll hand over to Larry soon to address your points in detail on food. But I think the consolidation in Colombia is one that I think is an illustration of how we typically think about the business, right? If we see positions or consolidation makes sense, and we believe we can be in a better position, we do it. Colombia was such a case. Actually, we -- you may have seen a few weeks ago, we announced a merger with OfferUp in classifieds. I think it's another illustration of us being quite pragmatic when we see great value creation opportunity to address consolidation. I think around future consolidation, things are hard to forecast. But maybe, Larry, you can specifically answer the question on Zomato versus Swiggy, and whether competitors can sustain development in these tough times.

Yes. Thanks, Bob. So on the question on Zomato and Swiggy, I think the -- it's kind of teed up earlier by Bob on the call. And when we started discussing the sector in Capital Markets Day, you think about this space on 2 or 3 dimensions. There's the demand dimension, as Bob teed up earlier, that's basically a rising tide for the food sector globally. That's offset by the supply side, both the supply of restaurants and the supply drivers. And at this point, we have reason to believe that it's impacting everybody in the Indian market equally. So they'll all be benefiting from the increase in demand that restaurant closures and challenges in securing food supply and private suppliers can impact everybody. To the second part of that question, I think it's an astute observation. I think this can be a very capital-intensive factor. And we're fortunate to have some very good operations that run leaning and adaptable. I think you'll see some of the weaker businesses globally struggle to survive in this new context. And then shifting to your last question on education. It's doing very well in this context. This is proving to be a bit of an Internet moment or rising tide for the education sector globally. And yes, do we believe in the promise of the sector long term? We absolutely do. So it's a massive area of consumer spend, and in this time, challenging time, we're actually seeing a massive increase in consumer trial.

I just wanted to very quick follow-up. Just on online education. My question was actually, if you guys are going to potentially commit a significant amount of new capital to that new vertical?

Yes. Maybe I can take that, Cesar. I think we have already invested. The vast majority of our ventures, investments have been in edutech. And we are very committed to the segment. I think the challenge is always, can you predict what is going to be done in M&A going forward? That's very hard to do, and we typically don't do it, and we don't do it here. But I think the -- that we know the sector by now, we have 5 different investments that are all performing well. So if we see the right opportunities, we'll do more.

Our next question is from Lisa Yang of Goldman Sachs.

So I think I have a couple of question on M&A. I mean it's great to see you guys announced [indiscernible] market consolidation deals that go ahead with you and on delivery side. I'm just wondering if you can talk about the opportunities ahead. Are we talking about sort of same size of deals like more bolt-ons? And what would be the priority if we think about the different categories? And I'm just wondering how you're also thinking about financing these acquisitions, whether it's going to be through cash as opposed to using some of your subsidiaries equity? That's the first question. The second one is on classifieds. I mean thanks for giving us some data points on the kind of traffic you're seeing. I'm just wondering how much of your classified revenue is driven by subscription as opposed to paper listing and display, just to see how that could be affected? And what sort of like penetration of online classifieds are we talking about today across your various markets? And the last one is on, I guess, the discount. I mean clearly, the Prosus discount has one [indiscernible]. And I think that the placing by Naspers earlier this year has had created more pressure. So I'm just wondering how do you think about the way to go to 70% of proceeds in the near-term and maybe over 50% over time without putting more significant pressure on the Prosus discount? Like anything you can share would be helpful.

Yes. Thanks a lot for those questions. I will answer the first one, and I'll answer the third one as well. And I'm sure Basil will chime in there as well, and then I will ask Martin to answer the question on classifieds. So when it comes to future M&A, the vast majority of what we will do, if we do big transactions, will be in our core operating segments. So we have made investments in new smaller earlier-stage deals, but they typically consume very small amounts of capital. So what we will do is we have a number of segments, we think have huge further promise, and that's where we will allocate our capital. And I think the most important consideration for us is not so much around, is this a bolt-on or is this a new geography? It -- is this really around value creation? Do we believe we can get an excellent return on this further investment? Do we have superior knowledge of the space that gives us the ability to come up with this above-average return, that really drives our decision-making. In terms of sources of M&A funds, first of all, we have a very substantial amount of cash, Basil mentioned it. We also have an undrawn revolving credit facility. So we have actually a lot of capacity to do further M&A without raising further funds. And I think if we would raise further funds, we'll see potentially, over time, more capacity to add further debt to the balance sheet. So that's to your first question, and maybe then I'll ask Martin to step in and cover your second.

Yes. Thanks, Bob. I think you had 2 elements to your question. I think the first one, I understood best, which is around, what share of our revenues is B2C and subscription-based. And that's a fair amount. So most of our revenues stem from the high category verticals like cars, real estate or jobs, but combination is about 3/4 of our revenues. And a substantial amount of those are paid for by professionals in those industries, whether that be car dealers, real estate agents or recruiters. So don't come as a surprise that the numbers that Bob and Basil alluded to is that, in a virtual lockdown, people hold on to assets they have and they postpone larger purchases, which means that professionals also seek to reduce their costs, and that's why we help them to overcome this period by offering discounts and deferring fees so that we keep the relationship for a longer run and continue to have that content on our sites so that we continue to fulfill demand, which actually is holding up quite well. I think the second part of your question was around, what's the penetration by market? Which I couldn't quite calibrate. But let me know if this is what you're looking for. So our largest market is Russia in terms of number of users and revenues and profit and so on; then comes Poland; then comes Brazil; and then a number of European markets; and then by a sheer volume, India also is high on our list. And as Bob said, these markets are no exceptions when it comes to lockdown. So all of them are exposed to the crisis. And yes, as Basil alluded to, which I will reiterate is that the variable cost will obviously be slashed, and we're using this time to continue to position ourselves as a partner of choice for the long run and on the line side, as described before, and spark innovations to help to have as much trade as possible still happen either digitally and run services or wait there with pay-and-ship solutions that can circumvent the current constraints.

Actually, I was more asking about the penetration of online classifieds, online versus offline. But clearly, this will actually just shift towards online. So just wondering like where we're up to in terms of penetration today?

Penetrations online classifieds versus offline classifieds?

Yes. Yes.

Okay. Well, that is -- most classifieds in these markets are online. There's very little offline classifieds still happening in the markets we -- I just mentioned.

Yes. And I will have a first shot at answering your third question. So indeed, in the last few months, the discount has widened. I think that's actually the case for many companies, which there's a sort of a comparable structure as we have. I think we've actually fared better than many others. And maybe the first comment to make is that -- actually, the fact that it widens, while I think a lot of our business is actually, if you will, very well prepared to handle a crisis like this, shows that it's really a mark -- a market issue. But having said that, we are keen and committed to reducing the discount over time, and you'll seen -- you've seen a lot of action from us in the last year. And there are other things we're considering. Now the specific point around if we would reduce the shareholding of Naspers and Prosus further, there is indeed a threshold there at 70%, where if we would go below 70%, the tax treatment of internal restructurings would change, which could be financially less beneficial. So what we are doing is to make sure we're creating the circumstances for that to be a possibility later. But that is really all I can say about that at this point in time. Basil, anything to add from your side?

No, Bob, I think that's well outlined. So the work continues. And when we have a clear plan and answers, we'll revert.

Next question is from Will Packer of Exane BNP.

It's Will Packer. Thanks for the initial comments on the customer relief in your key classified markets. Could you just confirm the precise size in Poland and Russia? And should we expect these to be extended for the duration of any quarantine? My second question is on Avito, there's some reports in the local media that Avito have been excluded from a Russian government list of 400 key websites, which can be accessed for free, despite all of the competitors being included. Could you explain why? And is that a risk for Avito going forward, particularly due to its foreign ownership? And finally, just following on to the previous question, could you comment on the ideal percentage of Prosus that Naspers will own? And assuming it's lower than the current level, which I think it's fair to say, it probably will be, how will you get there in the most market friendly way?

Yes. Thanks, Will, for your questions. So I will deal with your third one and I'd be relatively brief about it. And I'll start on the second one, which is obviously more in Martin's field and also question 1 is firmly in Martin's business. So we don't have an ideal percentage in mind. We think that reduction over time could be beneficial, and we will think through -- as we've done actually with the initial transaction, what are the best options to do this in a way that is efficient for our shareholders. That's front and center when we make such a move. So you can trust us to be very mindful of that going forward, but I can't comment on that at this stage, it's just too early. And Martin can comment specifically on the Avito case, but I think what is really important is we have been one of the most -- one of the largest, by far, investors in the Russia, period, and by far, the largest in technology in Russia, and we've been doing that for a long, long time. And I think that loyalty and commitment to Russian Internet has been very much appreciated in the Russian market, and we generally have an excellent standing in that market. But maybe Martin, you can comment specifically on the Avito case?

Yes, Bob, thanks. Now, so first, on the -- let's say, the price relief for our business customers. So in Russia, that is to the tune of about 30%, and there are some variations around it depending on the category and the type of products. And that is at this point for April only. But obviously, that's something we'll review on an ongoing basis and adjust as the situation evolves itself. In Europe, the -- let's say, that's been slightly different, let me just try to find here on the, at a different level of discounts, but it typically comes down to a local strategy on how to preserve content on our sites and maintain that long-term relationship, as I said. The discounts in Poland and in other places in Europe, I remember, are slightly higher than 30%. And if you insist, I can follow-up on that offline with precise numbers. With regards to the Avito question, so building on what Bob said, we have been and plan to continue our long-standing investment in Russia. And the lift that you referred to seems to have been a relatively haphazard action as it temporarily leaves in this time of crisis. There's a broader initiative in Russia that was started back in January with some -- government thinking around which Internet services should be for free, even if you can't -- so accessible, even if you can't afford it. And we are basically in the process to understand the criteria and see if we qualify and want to be on that list. And yes, that means simply that the focus of our initiatives in Russia are to deliver fantastic service to Russian consumers and businesses that people will use in this time of crisis and far beyond for which -- yes, and as I said, to work with the Russian authorities to understand if it makes sense to get on that list.

Our next question is from Catherine O'Neill of Citi. Our next question is from Andrew...

Sorry, sorry. I am here. Can you hear me? Sorry, I had it on mute accidently. So you can hear me, let's go. I wanted to ask about private funding and what you're seeing happening in the market at the moment in terms of funding accessibility for peers and also valuations. The other question I have is on sort of new initiatives around credit lending within payments and the CTX business. What are your plans there? And how has that been impacted or delayed?

Sorry, Catherine, the second one is around credit and CTX, right?

Yes. Just in terms of those new initiatives given the current situation, I just wondered if you have an update on those in terms of your sort of rollout plans, whether they've been delayed or stalled or whether your views have changed at all?

Yes. No, I can give a quick answer and then maybe Laurent, you can chime in on credit. And maybe, Martin, you can chime in on convenient transactions. So the first question was around funding availability and valuations. I think here, you see -- I think we've seen, depending on the companies involved you've seen all end of spectrum, some businesses are well funded, have managed to keep spend under control. We've seen other businesses. You've seen the news on some that really are in a cash crunch, in which case, there are some issues. We're seeing basically -- there's obviously some limited ability to do deals with us. If you can't do diligence, you can't meet people, then I think that is some limitation. But I think it's a very diverse field. When it comes to credit, the short story is that in anticipation of COVID becoming the worst problem, the team in India has been very prudent. And Laurent, maybe you can comment a bit more on that.

Yes. Yes, absolutely. So when you look at credit, actually, the big market that we have is in India. You might remember that we announced the acquisition of PaySense just before the end of the year. So what it means for us is basically, right now, we have restricted our credit policies. We are not issuing new loans. We have assets under management around $100 million. And the reason we've done that is basically, right now, we see with the moratorium imposed on repayments by the government. We see this as the best move to be prudent and not increase our losses going forward. So that's one. The second thing that we are doing actually is we are putting in place initiatives for our consumers actually to protect their credit score because that's for us, I think, one of the big opportunities. What we see in India, it's not so much the problem of credit quality, it will be a problem of liquidity in the market. So I think on one side, we are protecting our consumers, with the credit score. We launched new product on this called Credit Shield. On the second side, actually, we are continuing to working with the banks to actually reinforce our balance sheet and our portfolio. So I think right now, it's fair to say that because everything is in lockdown until the end of the month, in India, we won't be restricting -- I mean we won't be reopening our credit policies. This will go into May. So we've taken deliberately a very prudent approach on that one.

And then just on the CTX and your convenient transactions?

Yes. So it comes in different forms, right? So we see opportunities to expand our offering in payment and shipping solutions. So to enable a C2C or B2C transactions in goods that when people can't leave their homes, they can still trade. So that's -- depending how long this crisis will last and lockdowns will last, that might actually accelerate that business line, which is great. And numbers have meaningfully picked up in a number of geographies. And other forms of CTX around cars inspection, yes, that is down to a minimum. Our inspection centers, of which we have to the tune of 500 or so had to close all but a few. And yes -- but it doesn't bend our belief in the long-term viability of that business model, especially when coupled with the resourcing and distribution power of OLX. So naturally, we are behind the scenes preparing for reopening them with a vengeance when the crisis ends and continuing on the rollout path that we have been on for some time now.

Next question is from Andrew Ross from Barclays.

I've got two. I just wanted to come back on food delivery in the Colombia deal that you announced yesterday. I'm wondering if you could just tell us a little bit more about what's going on in Colombia, kind of your market share and what the strategy is going to be? How much you think it will cost to kind of dislodge Rappi as the number one? And how much fund is committed versus is still to come? And then I guess as a follow-up of that, how do you think about iFood's broader position in Lat Am? Kind of longer-term beyond Brazil and Colombia. [indiscernible] just wondering if you can give us a quick update on the transaction to acquire ZAP in Brazil. Kind of how are you procuring that and why you think that's all going to be okay?

Okay. So the last question on ZAP is for Martin. And maybe he can give you an answer on that first. And the questions on the Colombia deal and iFood general position in Lat Am, I will pass on to Larry. But maybe, Martin, you can start.

Yes. And I'll be brief because there's not much to report on that deal. We are working with the competition authority to seek approval for this acquisition. And when there is news, then obviously, we'll let you know.

And Larry, would you mind covering the other questions on Colombia and on iFood broader position in Lat Am?

Yes, absolutely. So on the Colombia deal, as you dealt, we put together the IT business with [indiscernible]. And the combined platform and combined business is just much healthier, right? You're going to have more than 12,000 restaurants on the platform and operate in 30 cities in Colombia. So we feel like that combined business is on much more solid footing. And I think consistent with food delivery globally, when you talk about competing with Rappi, I think, the sector is still in its very early stages. So at this point, we're just happy to sort of put these 2 assets together. And then focus much more on their own operations versus playing the share gain with Rappi. And then on iFood's position in Lat Am, as we touched on Colombia, I would say, also present in Mexico and Brazil. I'd say at this time, the opportunity, and Bob alluded to it earlier, the opportunity in Brazil is really front and center in our focus. Business was performing quite well. The IT business in Brazil is performing quite well prior to COVID and the demand has really gone through the roof. So it's -- that's starting from a nice share position and solid growth and only accelerated from there.

Our next question is from Miriam Adisa of Morgan Stanley.

Two more on food delivery from me. Firstly, just your thoughts about how consumer behavior may change in a recession. So I guess the general perception is that it's quite resilient in food delivery. So just wondering if you have any observations from how that may be different in emerging markets? And then secondly, on the pivot towards grocery delivery that we've seen from a lot of food delivery platforms. Just wondering, firstly, how your businesses are positioned to do this? And then also what you think the long-term implications might be from this in terms of perhaps a more of a multi-vertical and more logistics model?

Yes. Thanks for those questions, Miriam. And maybe I'll start and Larry can dive a little bit deeper. And I think what we have seen across the world is that the food delivery is such a rapidly growing phenomenon and it's most certainly -- I think initially, we thought it's more of a sort of at least middle class or semi-affluent product, and it turns out to not work that way at all. I think the price point at which we deliver food in India or in Brazil is actually coming down quite quickly and really is a mass market product that effectively competes with other ways that people feed themselves. So we see it actually being quite recession proof. I think the positive that we've seen almost everywhere is just a significant increase in demand and also many first-time users to food delivery and that's obviously very positive, right? If people try this now for the first time, while previously, they didn't have it as part of their food habits, then something like this is actually going to be introducing a whole new group of customers to a business model that we know they will like. So in that sense, I think actually quite positive. So we have some supply issues in some markets, particularly in India. But I think the demand side and new trial is going to be actually really exciting. And in terms of pivot to growth, Larry, you can speak in more detail, but I think several of our businesses have already started this, and this has been a catalyst to step more on the gas. But Larry, you are much closer to the operation.

Yes. And actually, just to build on the first point, I think you nailed it. If we look back to 1 year together before Capital Markets Day, which in today's context, seems like decades ago, but it was really just 4 months ago, the biggest questions we got were around marketing spend. And I think then we talked about how we are trying to introduce this product and drive consumer trial. The benefit we have now is that demand is coming organically. And still, we're talking about addressing very, very few real occasions as food delivery. Shifting to grocery, one of the interesting things about these food delivery platforms, the brand recognition, the customer retention is high. But if you think about the assets that the food delivery companies have, we have tens, if not hundreds of thousands of drivers on the road. We have local infrastructure that can be used not just to deliver prepared restaurant food but we are seeing many of our companies accelerate their grocery initiatives. And as we've seen the food supply chain get disrupted, it's actually -- companies have proven surprisingly nimble in their ability to adapt their products and move from prepared food to grocery. I mean it's really just a matter of securing supply. So I think coming out of this, one of the things that we will learn from it is grocery is having its Internet moment now. We'll learn how big this sector can be.

All right. I think we have time for just one more, Irene.

Our last question is from [ Mira Lee ] of Jefferies International.

I have two quick ones too. So firstly, why are you all focused on supporting the existing investing company and operations? Should we assume no new investments? Or can you -- do you want to continue to make new investments this year? And secondly, maybe I have missed this, but clearly, like there will be cash outflows from operations, which will increase due to the disruption you guys just described. So do you guys have any scenario or initial expectations for how much that might be this year?

Yes. Thank you for your questions. I'm happy to answer the first one. And I can also touch upon the second one. And Basil can give some more color. So we are, first and foremost, focused on our core operating segments and our investments there, and we want to make sure that all of our businesses that we have invested in come out stronger from this crisis rather than weaker, and that's first priority. But within sort of the key operating segments, we will -- we are continuing to look at other opportunities. So we might invest in a new company that we think they strengthen the portfolio and have a great return possibility. So we are definitely not looking at new opportunities in this time. But the key criterion as always will be, do we know we can get a great return from it? And does it strengthen us strategically? And then on cash outflows from operations. I think Basil mentioned it briefly in his piece, and we've done modeling out. I think the most important conclusion is that from a balance sheet point of view, these -- the change in operating cash losses will not impact our -- the strength of our position. But Bas, maybe you want to comment further.

No, Bob, I think there's not much more to say other than we've looked at even the worst-case environment and we believe we're comfortable with our balance sheet and our liquidity and our ability to support our businesses as well as the M&A.

Thanks for your questions. And I think we've reached the end of our time limit. And apologies for some connectivity issues we had, but I do believe we have given you opportunity to ask the question, and we're really grateful for your questions. And maybe in closing, I just wanted to wish you all the very best, stay well, stay healthy. We are running the business. We're in a good place, and we can withstand the storm, and we're focusing very hard on coming out of this very strongly and grabbing any opportunities that this crisis might present us. So thanks for your time, and have a good rest of the day.

Ladies and gentlemen, that concludes this conference. Thank you for joining us. You may now disconnect your lines.