Nov 25, 2019
Operator
Good day, ladies and gentlemen, and welcome to the Prosus and Naspers Half Year Results Conference. All participants are currently on listen-only mode and there will be an opportunity to ask questions later during the conference.
[Operator Instructions] Please also note that this call is being recorded. I would now like to turn the conference over to Eoin Ryan.
Please go ahead.
Eoin Ryan
Thanks, Chris, and hello everyone. Welcome to the First Prosus’ and Naspers’ interim earnings call.
You can find our full -- our report on and accompanying documents on the Investor Relations websites for both Prosus and Naspers. On the call with me today is our CEO, Bob van Dijk; and our Chief Financial Officer, Basil Sgourdos.
Bob will give a quick strategic overview and Basil will hit the financial highlights before we open the call for Q&A. To kick things off, I’ll hand it over to Bob.
Bob van Dijk
Yes. Thanks a lot, Eoin, and thanks, everyone for joining, and welcome to our 2019 half year results call, which will cover what I think have been a very busy six months indeed.
So, be relatively brief with my remarks today as we plan to provide an in-depth look inside our business at the Capital Markets Day next week, and I would like to also make sure that we have ample room for Q&A today. So, the last six months were transformational for the Group and they reflect the work of many months of preparation.
And while we’re keeping our focus on operations and driving continued solid results, we’ve also transformed the entire structure of the Company into one which I believe will unlock substantial value over time. I’m very pleased with the progress that we’ve made and the ground that we’ve covered.
So, if I can take you to slide four, I will walk you through the highlights. So, we’re very happy to report the solid first half of Prosus results.
So, revenue grew 20%, while trading profit and core headline earnings grew 7% and 10%, despite re-stepping up our investment in Food Delivery. We saw strong execution across our three core segments.
So, in Classifieds, we delivered excellent results, particularly from Russia, from Europe, Brazil and India. So, product and tech innovation is driving stronger user engagement that enables us to monetize data.
Paying listers grew 22% year-on-year. So Classifieds remains profitable overall and the traditional core increases margin as Basil will cover in more detail.
In Payments, transaction volumes increased 30% and reached almost $18 billion for the six months. India is now more than 50% of volumes and is growing really fast.
And in Food Delivery, we’ve increased our investment substantially, and the early indications are very positive. So iFood, Swiggy and Delivery Hero are growing very strongly and are ahead of our expectations.
In total, the number of our food orders increased 110% year-on-year and GMV increased 81% year-on-year during the period. So, as you’ll know, in September, we successfully listed Prosus on the Euronext Amsterdam.
So, this is significant step forward for the Group and it provides easy access for a larger and deeper pool of international tech investors in our attractive portfolio. It also begins the process that will allow us to unlock substantial value in both Naspers and Prosus over time.
And finally, as an organization, we continue to get more fit. So, we operate in an environment of continuous disruption and a lot of that is driven by new capabilities and artificial intelligence and machine learning.
So, during the period, we continued to invest in our capabilities in both areas across our entire Group. So, if you’ll join me on slide five, let’s spend one more minute on the outcome for the Prosus’ listing in September, which will continue to unlock value for shareholders.
So, the listing created the largest listed consumer intent company in Europe, comprising all our internet interests outside South Africa. So, Prosus is 74% owned by Naspers with a free float of 26%.
So, as Europe's largest listed consumer internet company by asset value, Prosus gives global internet investors direct access to our attractive portfolio of international internet assets as well as a unique exposure to China, to India and other high-growth markets and to the global tech sector. At the time of the listing, value unlock was approximately $16 billion to the reduction of discount to the combined net asset value of Prosus and Naspers.
So, we have been included in a number of new indices and we expect to continue to be added to more, starting with AEX in December and potentially further inclusion into the stocks’ indices in the New Year. So, it’s certainly been a volatile couple of months since we listed Prosus.
So, much of which was expected. And we recognized that the discount to the some of our parts, while roughly down 7 percentage points since the announcement of Prosus earlier this year, has widened over the last month.
That said, it never serves the company or its investors particularly well to focus on the short-term. So, I'm really pleased with the value unlock to-date; and over the long-term, I believe we will make significant additional progress.
My team and I remain very committed to the continued reduction of the consolidated discount in Naspers and Prosus. We will do this by two things: First and foremost by building bigger and more valuable businesses across our core segments that will generate substantial and sustainable cash flow, and also by continuing to take financial and structural steps where sensible.
If we can turn to slide six, I am proud of the focus and execution that's exhibited by our operators during a period of significant noise and workflow. And I think, this is illustrated well [Technical Difficulty].
So, operationally our key segments are performing well. In Classifieds, revenue grew 48% all-in and 38% excluding the expansion into convenient transactions.
In the core business, paying listers grew 22% year-on-year and our convenient transactions offering is growing very rapidly with tangible synergies with the core. Payments and Fintech continue to exhibit strong growth.
So, volumes processed in the Payments business reached $18 billion for the half year, up 30% year-on-year on the back of over 550 million transactions. Among PayU’s major markets, we have a leading position in India, which is a very large growth opportunity, given the significant tailwinds of increasing e-commerce penetration and the shift from cash to alternative digital payments.
Food Delivery represents a massive opportunity. As I just mentioned, order and GMV growth remains very strong as we solidify our position and to grow the market.
We will take you through all our businesses in much more detail at the Capital Markets Day next week. So, if we can take you to slide seven, it shows that we continue to invest across the business.
So, we invested just under $400 million in M&A in the last six months. So, to further strengthen the payments business outside India and increase our footprint in growth markets, we acquired Red Dot Payments, which is Singapore's largest homegrown and trusted online payment solutions company.
Also in payments, we required Wibmo, which both enhances our partnership with leading banks for security and mobile payments as well as improving success rates on transactions. So, in Classifieds, we merged our operations in the Philippines and we contributed an aggregate amount of cash of $56 million for a 12% effective stake in Carousel.
In Ventures, we invested $80 million in Meesho, which is a leading social commerce online marketplace in India. In the period, we also swapped a 43% stake in MakeMyTrip for 5.6% stake in Ctrip.
We've achieved an IRR of approximately 24% on the MakeMyTrip investment over its lifetime. And more recently, in October, as you'll know, we announced an offer to acquire Just Eat in an all cash deal, which is detailed on slide eight.
So we believe, we’ve put together an attractive offer, but unfortunately, we've not been able to reach agreement with the board of Just Eat to secure a recommended offer. So, we've taken the offer to Just Eat shareholders.
As you may know, Just Eat is also currently subject to an offer for an all share takeover by Takeaway. So, we believe, our offer provides compelling and certain value and is a fair cash offer for our business that's been underperforming and requires substantially more investment than the market expects.
So, we have already spoken to many of you and we're hopeful that the merits of the proposal will be recognized by the Just Eat shareholders and that we can engage further with Just Eat’s board to progress to a recommended offer. We have released our offer document on the 11th of November, and that sets out our offer terms and the first closing date for the offer.
We've lowered the acceptance condition from 90% to 75% to put it at parity with Takeaway’s offer. So, we expect to have a greater degree of visibility on the outcome of this process by the end of December.
It is very important to note that throughout this process, we will as always, remain highly disciplined as our overriding objective is to create value for our shareholders by delivering excellent returns. So, I'll now hand over to Basil for the financial update.
Basil Sgourdos
Thanks, Bob. Hi, everyone, and thanks for joining us today.
So, as Bob mentioned, this has been a transformational 6 months for us. This is the first reporting period for the newly listed Prosus Group.
[Technical Difficulty] reflect that of Prosus almost entirely as Naspers consolidates Prosus and then adds the Media24 and Takealot numbers. For the reason explained above, we’ll be focusing on the Prosus reported numbers.
Before I dive in, following the listening of Prosus, there are now new investors listening in. So, I'll give you a quick reminder on how we report our numbers.
First, revenue and trading profit are on an economic interest basis, meaning they include our proportional share of results of our associates and joint ventures. Second, we report our associates Tencent, Mail.ru and Delivery Hero and others on a three-month lag basis.
Third, free cash flow, core headline earnings are both consolidated numbers. And finally, as I work through the deck, I will focus on organic growth.
Organic growth rates measure growth in local currency, excluding the impacts of M&A. So, let's kick off with slide 10.
We're happy to report a strong prospect of Prosus results, representing progress for the Group in line with our expectations. We saw continued strong growth from each of our core segments, Classifieds, Payments & Fintech, and Food Delivery.
Classifieds and the Payments & Fintech segments have reached profitability at their core. Revenue growth continued to flow nicely to the bottom-line, even as these businesses invested in a number of strategic initiatives to drive future growth.
Food Delivery will continue to be the largest investment area for the Group in the year ahead. We're very pleased with and encouraged by the business, impressive order and top-line growth.
Importantly, we see strong underlying unit economics as we achieve increased scale. Our share of Tencent revenue and trading profit grew 18% and 16%, respectively.
Quarter two growth was significantly stronger than quarter one. Revenue accelerated by 5 percentage points and trading profit by 12 percentage points.
Finally, the first half was another six months of improved cash flow from the core profitable businesses and yet another period with a strong balance sheet. We now have approximately $9 billion in gross cash; and should we need it, more liquidity to realize our ambitions.
On the right hand side of the slide, you'll see the strong performance all around. We grew revenues 20%, trading profit increased at a slower rate of 7%, entirely due to the significant step-up in investment in Food Delivery.
Meanwhile, core Classifieds, Payments & Fintech and Etail accelerated their profitability and Tencent delivered a good performance. Free cash flow remained flat year-on-year when we exclude Prosus listing costs, despite the increased investment in Food Delivery.
Core headline earnings increased 11% year-on-year, translating into $1.05 per share. Turning to slide 11, we see encouraging progress across the segments as they are scaling well.
Ecommerce revenue growth remains a strong 28% year-on-year with meaningful contributions across the portfolio. Revenue in ecommerce for the first half totaled $1.9 billion.
As was the case in full year ‘19, the 28% growth is a faster growth than that, which we saw Tencent. Classifieds’ revenue increased 38% year-on-year, as the business scales its convenient transaction models, which is extending our presence in the [Technical Difficulty], and deepening our relationship with both our users and the car dealers on our platform.
Payments and Fintech continued exhibit strong growth, particularly in India. In the second quarter, revenue growth accelerated 3 percentage points compared to the first quarter, driven by a better performance in India.
India revenue growth accelerated from 29% in the first quarter to 39% in the second quarter. Food Delivery grew gross revenues by 107% year-over-year, 69% after making customer acquisition costs off.
This is meaningful and a very encouraging acceleration. But most encouraging is that we are seeing clear signs of improved efficiency and how the businesses are acquiring new customers, reactivating lapsed users, and expanding into new cities.
If you will join me now on slide 12, you'll see that we had some nice momentum to round up this half year. Given that we reported quarter one results as part of the Prosus listing in September, we can give you additional insight on the quarterly progress on the core segments.
In short, we saw an acceleration in revenue growth in every line across the ecommerce portfolio in the second quarter, with ecommerce revenues growing 9 percentage points faster than that of the first quarter. So, let's get into the detail of the segments and let's start with Classifieds on slide 13.
So, you'll see on that slide that Classifieds revenue increased a strong 38% year-on-year to $587 million. Our business is evolving to best meet the rapidly changing consumer environment.
The most important development on the financials is our increased exposure to convenient transaction models, which deepen our market presence and enhance the consumer experience in the autos vertical. Due to the different models for revenue recognition, we have also improved disclosure by now showing revenues and costs for the core Classified business and the convenient transaction models separately.
So, let's start with the core. Revenue on the core Classifieds business increased 22%, driven by Russia, Europe and Brazil with group paying listers also increasing 22% year-on-year.
Avito continued its good momentum, increasing revenue 21% year-on-year, and RuPay [ph] also saw strong growth across the largest vertical of autos with growth at 42% year-on-year. The Polish business once again reported a very strong topline growth of 27%.
Brazil also grew at 25% year-on-year. Classifieds convenient transaction’s revenue grew nearly 5-fold compared to the previous year.
Frontier Car Group, which was an associate in the previous period, is performing particularly well in driving the majority of the growth. We are optimistic about our investments in convenient transactions, which have tremendous synergies with core Classifieds.
You’ll have seen [Technical Difficulty] control of the Frontier Car Group which we will then fully consolidate. Overall, Classifieds delivered a trading profit of $37 million versus $42 million in the first half of full-year ‘19.
The modest reduction in profitability was due entirely to the significant increased investment in these new convenient transaction models that are temporarily loss-making. There was also added cost in further building out global tech infrastructure as seen at the end of full year ‘19.
We continued to invest through both our tech backbone to provide world class customer experience by leveraging large hands of concentrated engineering talent. Investments have increased meaningfully year-on-year.
This is becoming increasingly important as Classifieds has evolved from a marketing led to a tech-enabled strategy. Profits were also impacted by share-based payment expenses, driven by growth in employees and some increases in the underlying valuations on the back of fast top-line growth and improved profitability.
Stripping out the new costs for convenient transactions, you can see that the core Classifieds profits improved by a strong 36% year-on-year from $37 million to $63 million with trading margins rising from 12% to 14%. We continue to expect strong growth year-over-year for the rest of the year, but remember that as in the past, the first half tends to be seasonally stronger than the second half.
This is largely due to the timing of marketing spend, which is skewed to the seasonally stronger second half of the year. Overall, we're very happy with the performance of the Classifieds segment, which is well-ahead of our plans.
We believe the investment in convenient transactions, new products and tech backbone will provide incremental benefits to grow and scale the business even further. So, folks, let's move on to Payments and Fintech, which is a slide 14.
You’ll see that PayU recorded another six months of good growth, driven by its core payments business. Revenue growth of 20% was supported by stronger growth in the core payment processing business, which grew faster at 23% and that was partially offset by weaker results by some of the associates.
Payment volumes reached a sizable $18 billion, representing growth of 30% on the back of over 550 million transactions processed. India is still the fastest growing market.
It grew volumes 35% and it now accounts for 53% of volumes processed. As mentioned earlier, revenue growth in India was 39% for the second quarter.
The online payments space is still nascent in India and we see significant further opportunity there for PayU. It is uniquely positioned to benefit from the countries transitioning online from the traditional cash on delivery model, providing cashless payments together with our continued focus on innovative solutions that’s enabled the business to continue strengthening its merchant offering.
As I called out on the first quarter call, the weaker performance reported by associates was driven Luno which was impacted by Bitcoin volatility and Kreditech. We have since reduced our holding in Kreditech to about 12%, and we therefore no longer equity account it.
The core Payments business was profitable, enabling us to continue investing and integrating acquisitions such as Zooz, which helps us better serve global merchants in various markets via a single API. This does however have a short-term impact on profitability.
With our investments in Zooz and the acquisition of Red Dot and Iyzico and drive to build the credit business in India, we expect growth in payments to pick up over time. On slide 15, I’d like to tell you more about the Food Delivery financial performance.
Online Food Delivery revenue and order growth continued to grow rapidly, justifying our increased investment in this high-potential sector. In the period, all our online Food Delivery service assets continued their strong growth, resulting in GMV growth of 81%.
Combined contributions from the portfolio businesses saw reported segment revenues increasing 69% to $306 million with orders increasing a 110%. Reported revenues increased 69%.
However, this rate was impacted by increased investment in customer acquisition costs, which are netted off against revenue and the IFRS. Gross revenues before these discounts and other incentives grew by a much faster 107% year-on-year.
In order to achieve these growth rates, we have stepped up investment to grow the market and our position within it. Overall, our share of losses across the segment is $283 million and we expect significant additional spend in the second half of the year.
We will go into this in a lot more detail at the Capital Markets Day next week, but we are incrementally more confident with the unit economics for Food as well as our ability to scale in an efficient manner. It is important to note that from a cash flow perspective, trading losses in Delivery Hero and Swiggy do not impact cash flow as losses incurred by equity accounted investments are funded by the capital already raised by these companies.
iFood continues to outperform the targets we set. Driven by expansion of its product offering and logistics business, iFood grew GMV 92% with order growth being an impressive 122% year-on-year.
iFood is investing in first party logistics, new cities as well as building out cloud kitchens and other models that enable us to scale very quickly. On a per unit basis, iFood is realizing cost efficiencies as we scale and as we get better at optimizing.
In India, Swiggy continues its impressive growth with orders up 165% year-on-year and GMV up 134% year-on-year. This is driven by its rapid expansion into new cities and roll up of cloud kitchens and private label food supplies.
Delivery Hero continues to also execute well. For its first six months end 30, June, 2019, Delivery Hero’s GMV grew at 60% to €3.2 billion with all order volumes climbing 61% to 269 million orders.
Excluding the impact of Germany, sales revenues grew by an extremely strong 76% year-on-year. On slide 16, we unpack the increased contribution to central cash flows by our profitable internet businesses.
This is an important slide and illustrates the cash flow generating ability of the group. On the right hand side, we illustrate improved ecommerce profitability, particularly in our classified segment.
The aggregate of free cash inflows generated by internet units that are free cash flow positive, increased 17% to $573 million. Tencent’s increased dividends, of which our shared was a sizable $377 million, continues to be a significant underpin of our increased financial flexibility.
On slide 17, we walk you through our free cash flow results. Free cash flow for the six months was an inflow of $14 million compared to $96 million in the prior year.
The decrease was primarily due to $82 million one-time transaction costs incurred in the respect of listing of Prosus. Excluding these costs, free cash flow was flat year-on-year and that's despite the increased investment in Food Delivery.
The investment in food was compensated from profits in Classifieds and in Payments and then of course, the increased [Technical Difficulty]. Now, moving to the balance sheet on slide 18, you'll see that we have a strong balance sheet and the financial flexibility to continue to execute on M&A to enhance our core segments.
We have significant gross cash of almost $8.6 billion and an undrawn $2.5 billion revolver and the ability to raise additional debt, should we need it. We have said we plan to fund the acquisition of Just Eat principally from new debt, which whilst we remain investment grade, allows us to invest in other segments.
As a reminder, we have one bond that will mature in July 2020, and we are confident we can refinance that at more attractive rates in the near term. We also have significant cash flows coming from profitable entities within the Group.
On slide 19, we provide additional perspectives on our balance sheet. With the cash cushion of just under $9 billion and $129 billion worth of listed assets, we have the financial flexibility to fund all our growth ambitions.
We will continue with the same discipline that has driven the returns so far. So, in closing, folks, I'm very pleased with our first half year results and our position as we enter the second half of the year.
All core segments made good progress against financial and strategic objectives. Our priorities for the rest of the year are driving profitability in our established ecommerce segments while accelerating investment to scale Food Delivery.
We believe our financial progress will drive the growth of our core headline earnings into the future. And last and most importantly, we will remain disciplined in allocating our capital.
With these remarks, we will now open the call for Q&A.
Operator
Thank you very much, sir. [Operator instructions] Our first question is from Will Packer of Exane.
Please go ahead.
Will Packer
Hi. It’s Will Packer from Exane BNP Paribas.
Many thanks for taking my questions. A couple for me, please.
Firstly, could you just talk us through the rationale of the buyouts at FCG and talk about some of the potential revenue synergies that could be achieved, how things progress and where can they go with that asset? Secondly, India, Classifieds looks a very competitive market.
You talk to visitor growth of 30%. Could you just update us as to how things are progressing there, please?
Thank you.
Bob van Dijk
Sure. Martin is here with us.
So, you’ll hear it from the main man himself.
Martin Scheepbouwer
Yes. So, thank you for your question.
And I'll give you the headline now and it will be much more detail at the Capital Markets Day next week. But essentially, FCG is quite unique company that has build out infrastructure in many different countries that will allow us to deepen our platform and build true transaction-oriented ecosystems in cars.
And since making initial investment, they have outperformed on all their plans. So, we wanted to step up and accelerate, that’s an only short of it.
And we hope that deal will close imminently and then we can invest more and build that out. And one of the places we have done that is India.
And as you say, that is a very competitive market. But, the overall feeling of India is still that there is an immense growth potential considering the rapid inflow of new internet users.
So, we are today the market leader especially in cars, more than 70% of all used car trade in India happens over OLX. And now the question is, how can we adjust our products so that the hundreds of millions of new internet users also find OLX.
Bob van Dijk
So, if I can add one point to that. I think, one of the important -- basic two sets of synergies here.
One is, if you look at the sort of instant cash-for-car model, by far the biggest cost component is around lead generation. So, how do you find people who are interested in selling their vehicle?
Well, as Martin said before, those are exactly the customers that the group already has. Right?
So, that drives a tremendous amount of synergy between the two groups. And the other side, we typically have also the largest demand side for used vehicles as well.
So, when these vehicles need to be sold again, either by dealers or by providers, actually, we can handle that in a very efficient way. So, those are the two main sources of synergies.
Will Packer
Can I just ask one quick follow-up. On Food Delivery, you've expressed the willingness to look at developed markets.
In Classifieds you've previously invested in letgo. Should we think looking forward the developed market Classifieds as a major potential use of capital or would that be an incorrect interpretation?
Thank you.
Bob van Dijk
So, maybe I can give you a general answer and then Martin can maybe comment specifically on Classifieds. So, as a result of our Prosus listing, nothing changes in the way we do business.
There's no change in strategy. We've always been a growth company.
We're focused on growth first and foremost, whether the growth exists in a growing market or in a more mature market. And we've over time -- if you follow us for more than a few years, you’ve seen that we've always looked for great business models that are run by great people and they can be in earlier stage markets or in more developed markets.
So, I think, when you see us make a move like investing in letgo or pursuing an acquisition like Just Eat, because we think the business opportunity is huge, regardless of the stage of the markets. And Martin, maybe you want to add to that?
Martin Scheepbouwer
No, I think that's it. So, we saw the biggest growth opportunities historically outside Western Europe and North America.
But then, with letgo, that was step that where we capitalize on quite a unique situation in U.S. where the market the market is very mature, but Classifieds is underdeveloped.
And that's why we invested behind letgo few years back, starting few years back. And you'll continue to see us look for these growth opportunities, but as Bob said, regardless whether they are in developed or developing world.
And I believe that the Classifieds is transforming, as per Basil’s comment, where marketing led to more product, data and tech-led, where you will see platforms deepen towards -- more towards transaction-based ecosystems, which might or might not provide a new opportunities also in more developed markets.
Operator
The next question is from Catherine O'Neill from Citi. Please go ahead.
Catherine O'Neill
On Food Delivery, I mean, there's been some industry commentary that suggests maybe we’re seeing more rationality especially from private funding or capital. Do you have a view on global consolidation and where we are in that process and whether we could be heading towards market repair in some of the of the markets?
Also on Just Eat, which I guess is linked to that. Is this more sort of opportunistic chance that you've taken, given that the rating has got success, or is it an asset you see is strategically valuable?
And then, the other question I had is on Avito, or the draft law in Russia around foreigner ownership. Then, it may be that draft law is being delayed.
Could you just maybe talk about the position of Avito there and how you think about the risk? And then, finally, I just wanted to get your view on potentially for a buyback in Naspers and whether that's something that you would consider doing in the short term?
Bob van Dijk
Yes. Thank you for your questions.
And I'll start with the first two. And, Larry, if you're on the line, maybe you can chime in.
I'll speak to the serve [ph] bill. And then, Basil can speak to buybacks.
So, I think, if you look at the global food space, what we see is essentially that the further growth opportunity is very, very significant. And I think we're probably like, less than 5% of the way there into what Food Delivery can be at scale.
So, we are pursuing that with our businesses. That's actually the core reason why we have increased our investment in the space in the last periods.
We see a bigger opportunity that we are pursuing. So, I think whether that will lead to global consolidation, I think that's hard to speculate about.
But, I think the opportunity is frankly very large everywhere, in both early stage market, but also in more developed market, I think, there's still very significant upside, where, in many cases, businesses are still what I would call in generation 1 Food Delivery, which is just offering restaurants their existing delivery fleet. And actually, if you look at what generation 2 and 3 can provide with dedicated delivery fleets and innovation in private label, cloud kitchens et cetera, I think there is just a lot of upside from there.
And I think that actually is the same answer to Just Eat question. I think, we see that business traditionally had a good development, but I think has lost growth, has lost tremendous market share but we think with the right investments and the right partner, can actually get back on that longer-term trend of further opportunity.
Then, maybe Larry, if you're on the call, maybe you can add to these points. You're close to it.
Larry Illg
No. I think you covered it well, Bob.
I think, the only thing I would add is, clearly the discretion and consolidation, I think we're seeing it’s increasingly hard for the distant number three, and number four players who could be at the leadership position tend to perform quite well and that seems to be playing out, I think in the spirit of the question, in the target markets.
Bob van Dijk
Thanks Larry. Then, I'll briefly talk to the serve [ph] bill.
So, I think sponsor of the bill has publicly stated that the bill is going to be withdrawn, that might be reintroduced later. I think that is uncertain.
I think, our view is that, ecommerce businesses such as an Avito should not be covered by the kind of businesses that the bill is trying to address. But for the time being, those seems to be off the table.
And maybe I can ask to comment on potential buybacks.
Basil Sgourdos
Thanks. Hi, Catherine.
It’s Basil here. So, I think, Bob was very explicit in his comments when he went through his slides saying we've done this transaction to unlock value and remain committed to taking further action to continue to unlock value.
And that's what we're going to do. I don't want to speculate now when and what time, but I think it's definitely something that's well on the radar.
We're working hard at it. And when we're ready, we will come back and buyback is definitely one of those options.
Catherine O'Neill
Okay. Thank you.
Just one more question, actually -- I'm sorry, on free delivery. In India, there is article about the Amazon has entered the market, I think around Diwali with a really low commission rate, we’re also seeing signs of maybe [indiscernible].
Could you talk about the market in India, the Food Delivery, whether that's becoming more rational, whether there are signs of Amazon entering at all?
Bob van Dijk
Larry, would you mind -- you are closest to that, would you mind giving your views?
Larry Illg
Yes, happy to. So, I think, we’ve seen Amazon periodically pop up in several markets.
And I think the reality of the space is, as Bob teed up, it’s in the very early stages. So, I think, we will see not just actual competitors competing harder, but there are potential entrants and we list Amazon among that set, in many markets, not just India.
I think, what gets us most excited is Swiggy's not just performance but potential is bigger in terms of volume than the number two and number three players in the market. And while there will be entrants over time, we’re happy with how the team executes.
Catherine O'Neill
Okay. Thank you.
Operator
Thank you. The next question is from Andrew Ross of Barclays.
Please go ahead.
Andrew Ross
Hi, guys. I’ve just got one question and I should keep it quick.
There’s a slide in the analyst booklet, I think it’s number 24 that goes over how you guys define interest coverage, which I think is about six times at the moment. And maybe it’s one for Basil, but I wondered how low do you think you could push that interest coverage and still maintain your investment grade rating?
Or I guess, another way of asking that question is, how much debt do you think you could support right now and still have investment grade rating? And obviously that’s before you did any other M&A?
Thanks.
Bob van Dijk
So, as I was saying, I think we have plenty of financial flexibility as demonstrated by our ability to fund the Just Eat’s acquisition with principally debt. Is there room beyond that?
Yes. I don’t want to speculate though because I think there is a long way to go before we need to do that.
We have, as I mentioned, gross cash of about $8.6 billion, we have an utilized revolver. So, we're quite comfortable with our financial flexibility.
And then, again, I think, what we do and how much more we do, involves a continued constructive engagement with the rating agencies and then, we have a good relationship there.
Operator
The next question is from Aditya Buddhavarapu of Goldman Sachs. Please go ahead.
Lisa Yang
Hi. It's actually Lisa Yang from Goldman.
I have a few questions, please. Maybe the first one on payments, and you gave us, I guess India, which is up almost 40% and [Technical Difficulty] about 23%.
So, just wondering if you can give us some color on the other markets. It seems like the growth is quite slow there.
So, just wondering why it’s not growing faster, if there is any seasonality between first half and the second half? So that's the first question.
The second one on is on Classifieds. Just something on Panamera, could you give us a bit of indication sort of where you are in terms of migrating your different assets on to the backbone?
And what the impact or benefit have you seen so far from the assets that you move on to this platform? And maybe if you can like share what are the longer term benefits that you would expect?
And the third question is on Food Delivery. Obviously, your growth rate is very impressive at over 100% but obviously you have a lot of discounting happening in the first half.
So, just wondering, like given how the competitive landscape is evolving, both Brazil and India, how should we think about discounting into the second half in the coming years? Thank you.
Bob van Dijk
Thanks a lot. I will speak to Payments and I ask Basil to chime in, and Martin obviously will cover Panamera.
And I can give a first view on Food, and Larry can chime in as well. So, I think on Payments, I think we’re seeing very strong growth in India.
I think, the underlying drivers there are just -- and ecommerce business that's growing, ecommerce environment that's growing fast, we have very strong market share, and also, the country's digitizing quite quickly. And if you look at the restaurant portfolio, it's really a mixed story.
There are a few places in the world where we are migrating our platforms. And that leads to a certain level of slowdown.
That’s particularly the case in Latin America where we've done the major tech migration that typically leads to a setback. I would say Eastern Europe is growing well.
We've there seen -- our biggest customer was Allegro, which has scaled back a little bit, but actually other -- the other markets have grown very, very strongly. So, I think it's a somewhat differentiated story with a lot of the core markets actually doing quite well.
Basil Sgourdos
Yes. And Bob, what I’d add is of course, Central and Eastern Europe are far more developed markets.
So, when you just look at relative maturity, and we have very strong positions there, which then also drives improved margin and improved profitability. So, a big chunk of that profit growth that you're seeing in payments, is actually coming out of that part of the world.
And then secondly, we did call out the investment in Red Dot, which is Southeast Asia and iyzico, which is in Turkey. And those are going to be incrementally fast growing opportunities.
So, that will continue to drive growth over the broader portfolio.
Bob van Dijk
Yes. Thanks.
And Martin can talk about Panamera.
Martin Scheepbouwer
Sure. Yes.
Thank you for that question. So, as some of you know, we've decided to consolidate our technology in OLX outside Europe where historically we've had quite fragmented software development for let’s say customer propositions that were quite similar.
So, in order to reduce duplication and to the benefits of scale from -- focus of excellence around the group, we decided to consolidate and converge platforms into a single one, which is now live in Africa, in Pakistan, in the Indonesia, Latin America since last week. And we see this very much as a necessary condition to continue to innovate fast and realize -- sort of customer engagement in the future, and actually the starting point for what we then call sort of deeper platforms facilitating transactions everywhere.
So, from here on development will continue. And I see lots of long term benefits around quality of products, customer engagement and the ability to innovate and adjust platform to local needs.
Bob van Dijk
And maybe on Food, I'll start. And Larry, maybe you can elaborate a bit more.
I think, there has been significant discounting in the market, particularly in India. I think, what we've seen that we feel really good about is that our market share’s either stable or increasing.
I think, in India, they're clearly increasing on the back of I think also like increased innovation, and just solid execution beyond discounting. And the thing that gives me a lot of confidence is the retention curves we see when we see customer acquisition and see what percentage of customer is still around off the year.
It’s still probably the healthiest customer retention that I've seen in any sub sector of ecommerce. So, that's I think a key driver for our levels of confidence that we’re doing marketing but we're getting the right results for it.
But maybe, Larry, you want to add.
Larry Illg
Yes. And I think we are seeing some signs of rationalization of discounting around the world, including Brazil and India, but [indiscernible].
The role of discounting and coupons remains the same. The sector is early and coupons have been executed well, and discounting, they drive consumer trial, and our companies continue to show good discipline there, the cohorts as you tee up, the consumer cohorts remain strong, tied to that discipline but we will go into that more in Capital Markets Day next week.
Operator
The next question is from Charl Wolmarans of Avior Capital Markets. Please go ahead.
Charl Wolmarans
Can you give me here me well enough there?
Bob van Dijk
Yes. It’s okay.
You crept up a little. But, let’s try it.
Charl Wolmarans
So, just while we’re on the subject of Food Delivery, [ph] I just wanted to get some color around Swiggy and the cloud kitchens. Any type of color or update?
That is obviously still nascent at this stage. And then, the second part is just on Swiggy, which you guys disclosed is now in about 500 cities.
What do you really think that can get to? And basically, would you say that most of the course, if it’s already [Technical Difficulty]?
Bob van Dijk
Larry, would you mind taking those questions?
Larry Illg
Yes. I guess, the first question on cloud kitchens, I think this is very much a local story.
And it indicates in India, we've been, I guess, one, surprised in some ways by the [indiscernible] classic restaurants and the role that the cloud kitchens play for Swiggy is really not just introducing Food Delivery to the Indian consumer, but bringing restaurant experience. And we've been surprised by the -- I mean impressed by the payback of these kitchens.
So, we see a lot of further potential there. And I missed part of the second question, the number of cities for Swiggy, is that correct?
Charl Wolmarans
Yes. So, [Technical Difficulty].
Would you say that most of your core cities [Technical Difficulty]?
Larry Illg
Yes. It's a very good question.
The Swiggy indeed is now in over 500 cities. And that's a quite a dramatic change versus the seven cities that they were in when invested a couple of years ago.
And, I guess there is two comments on that. I think, the team has gotten quite efficient in terms of how it opens up in new city.
And new cities are often compared to adding an additional neighborhood in Bangalore or Delhi. And what we've seen is they've gone from 200, 300 to 500 cities.
I think that the consumer behavior holds up and the 500-city tends to perform as well as if not better than opening up a new neighborhood in an existing large city. So, we haven't yet seen a feeling there yet.
Yes, we're pleases with the progress.
Operator
The next question is from John Kim of UBS. Please go ahead.
John Kim
Hi, everyone. Couple of questions, first on Food and then on online Classifieds.
Within Foods, you've talked about your commitment and enthusiasm for the space. When you think about the segments, what sort of IRR levels are you targeting here?
And what sort of underlying assumptions are you making about 1PL and 3PL splits and models? If we were to compare and contrast Classifieds with Food, Food adoption moves early, but it seems like the fixed costs investment is sizably higher.
On online Classifieds, can you talk to us a little bit more about Panamera and convenience transactions? So, on the Panamera rollout, how far along on the IT deployment are you in terms of spend or timeline?
And on convenience transactions, once the margins normalize, what sort of margin range could we expect?
Bob van Dijk
Okay. So, thanks for the questions.
I will start with the IRR question, and then Larry, maybe you can say a little bit more about our perspective on 1P or 3P, if you don't mind. And then, Martin can talk to Panamera of course.
So, I think if you look at IRR, so far, our investments in the Food space have had an exceptionally high IRR, and Basil, you may have the number off the top f your head.
Basil Sgourdos
30%.
Bob van Dijk
So, they've been at 30%, which is obviously exceptional. And I think going forward, when we make investments, we aim to achieve IRRs that are in line with what we've done before, and that is what we work hard to achieve.
So far, it’s exceptional, and the aim is for this to be a high return set of investment for us. And I think, if I think about this long-term, what are really excited about is that it’s just at the early stages today and there is a multiple in terms of market potential for later.
And maybe, Larry, you can speak to the 1P, 3 question, because I also didn't quite hear that. Did you?
Larry Illg
Yes. I got it, I think.
I think, the question is touching on what mix we expect between 3P and 1P long-term. And this is really a market-by-market story, and even not just at the country level but at the neighborhood level what the right mix is.
And across our portfolio, we lead with the consumer and trying to figure out what approach is best going to serve consumer needs in the market. In the market like India, it actually speaks to the last set of questions, just because there is a lot of -- not just Food Delivery infrastructure from existing restaurants but restaurant infrastructure.
The winner in India across the cities and in neighborhood is going to be 1P player. That’s very different from where sort of our starting point was in Brazil was entirely third-party marketplace, and we realized that consumer needs long-term were increasingly going to be served by a first party model.
So, the team’s done a nice job of rolling that down out on the back of the marketplace. And today, those volumes are on for significant and growing chunk.
So, it really starts with the consumer line to see that -- what's the right model. We don’t start with business model first and force it down on consumers.
John Kim
Okay. Helpful.
Martin Scheepbouwer
It’s Martin here. Let me comment on Classifieds question.
So, with regards to Panamera, we’ve pretty much reached the end of the line with regards to let's say the consumer side migrations in Latin America last week. Going forward, obviously, we will continue to develop the platform, as I mentioned before, and also build out our shared services function together with our European platforms in OLX to as I said improve the economies of scale on the technology and to reduce duplication and spend our resources more efficiently, which will allow us to build out infrastructure everywhere to get closer to the transaction, what we then call convenient transactions.
And with regard to margins, it’s really early days. I mean, convenient transaction comes in very different forms or flavors; it’s in jobs, it’s in goods, it’s in cars, potentially even in real estate.
And to give you example what we saw in cars is a price transparency, convenience, speed, safety concerns in any many cases [Technical Difficulty] demonstrate that people are willing to pay for that depending on the markets, gross margins in buying cars and reselling can be sort of to 5% to 15%, but I think that’s the entry point also to sell additional services around finance, insurance and many other things. So, which will, in a long run further bolster the margins on that line of business.
So, it’s early days. And we’ve seen lots and lots of proof points that we fulfill new customer needs.
And as per Bob’s points, there are true synergies with the horizontal platforms, and building out the infrastructure to make that possible at the global level. And yes -- and then, we’ll unlock further monetization [ph] opportunities.
John Kim
Okay. Thank you.
Bob van Dijk
Okay. Chris, I think we have time for one more question, please.
Operator
Thank you. And the last question is from Masha Kahn of HSBC.
Please go ahead.
Masha Kahn
Hi. Thanks for the opportunity to ask the questions.
I wanted to ask about the Classifieds revenue. On my estimate, it looks like all the revenue growth came from Avito and the convenient transactions.
What’s happening with the rest of the portfolio? I know that Poland and Brazil are growing, but why is the rest of the portfolio not growing?
That’s number one. Secondly, can you comment about letgo versus OfferUp and their comparative competitive position.
And thirdly, can you please explain what drove increase in stock-based compensation in the first half? Thank you.
Bob van Dijk
Yes. So, it was a little bit hard to hear.
So, we’ll try to answer your questions as well as we can, but we may need a clarification. So, I think first, you asked about the source of growth, if I’m not mistaken.
I think, Basil can answer that. Then, Martin can speak to letgo, OfferUp.
And I think Basil can talk to stock-based compensation. And if we missed anything, just let us know.
Basil Sgourdos
Yes. So, let me deal with the first and the last and then let Martin deal with letgo, OfferUp.
So, as I said in my script, Masha, in fact we’re seeing growth across the portfolio, and Brazil is growing 25%, Poland is growing 27%. India is still very, very early days and we’re not pushing monetization yet.
We’ve stopped pushing, use acquisition and growth. But even there we’re seeing good growth.
So, it’s not just Avito, and we’re seeing growth across the portfolio. And those -- that growth is in line with the plan.
So, we remain confident about the longer term growth, which will then drive profitability and cash generation. On the share-based compensation charge, while first of all, as Martin said, we’re building a tech-enabled infrastructure behind Panamera that requires engineers, it requires people.
So, we’ve added more people. And they need the short, medium and the long-term retention components, so it’s more people.
And then, of course, what you see in the business, it’s a business that’s growing profits, it’s growing top line and that drives valuation up. So, there is a little bit of that coming in.
And then, it’s a little bit more impactful in markets that were historically loss-making, such as Brazil which is now profitable. So, now you have more confidence.
And that of course -- that’s an important milestone that drives valuation. Let me hand over to Martin to talk about letgo and OfferUp.
Martin Scheepbouwer
Yes. So, letgo is in two markets in the U.S.
and in Turkey. And I think your question is specifically about the U.S., which is a huge market for Classifieds with many, many different platforms competing for market share.
Letgo is one of them, there is OfferUp, there is Craigslist, there is Facebook, there is several vertical offerings in every large category. So, these are very competitive markets.
But letgo is to take advantage of this segmentation to develop a sizable business that captures a fare share of trade. As I’ll also show next week, letgo is where things are growing very quickly, burn is coming down and it’s whilst holding its ground against direct competitors like OfferUp.
So, we see this is something that can deliver handsome return in medium to long term.
Masha Kahn
Thanks for that. Are they still the leader in the market or are they behind OfferUp now?
Martin Scheepbouwer
I'll present some metrics next week, but basically they're both in the same ballpark, it depends a bit on how you look at it.
Bob van Dijk
Great. I think, we are running out of time.
So, I'm going to close it off, if you don't mind. So, to conclude today's session, I would like to remind you that we mentioned a few times we're preparing for, I think, what will be an exciting Capital Markets Day in Amsterdam next Tuesday, the 3rd.
And we actually will go in depth in all our key operating segments and in particular, do a deep dive into our Food business. So, if I look at our priorities going forward, they are around driving further scale and profitability in Classifieds, in Payments and in Fintech and in B2C.
So, we will continue to invest in Food Delivery to enhance the product, to invest in technology and delivery capabilities. And we intend to at least maintain our growth and defend our market positions.
We intend to deliver a great return in everything we do. And we will maintain our disciplined approach to capital allocation.
And operationally, we’ll continue to build strong teams. And we are very much focused on embedding and operationalizing artificial intelligence, machine learning to enhance our products and our service offerings.
And finally, we're focused on unlocking value for our shareholders, and where sensible, we’ll take further steps to address the discounts. So, with that, thank you very much for your time and your great questions today.
And thank you very much. Talk to you next time.
Operator
Thank you very much, sir. Ladies and gentlemen, that then concludes this conference call.
And you may now disconnect your lines.