dLocal caps phenomenal year with soar-away IPO

T

o say that it has been quite a year for payments platform dLocal runs the risk of making a gross understatement. Its Nasdaq IPO on 3 June is not just a big deal in Uruguay; it is a big deal also in the US and in the 29 markets in which dLocal currently operates. 

The Uruguay fintech sector has never seen anything quite like dLocal. The sector may be modest but in dLocal, it has an already profitable payments platform with global ambitions. And while its valuation multiples are eye-watering, the firm says that it enjoys a huge runway ahead in the markets that it operates. Moreover, it is really only just getting started.

At first glance, a firm raising a mere $618m or so in its IPO, is not headline grabbing. But just consider the multiples: it is now trading at about 80 times revenue or 200 times EBITDA.

Revenues more than doubled in fiscal 2020 to around $104m.

Can such multiples be justified? The market gave a resounding answer in the affirmative. As recently appointed COO of dLocal Sumita Pandit tells EPI, dLocal did not go to the market because it was short of cash.

But the cash will doubtless be put to good use, as it continues to add products to its platform and continues to expand geographically.

For a fintech founded as recently as 2016, the numbers are impressive. For example, it enjoyed revenue growth in the first quarter of this year of more than 120%. It enjoys margins of a shade over 40%.

Little wonder then that Pandit is optimistic about the firm’s prospects. She only joined dLocal as COO in April.

Prior to joining dLocal, Pandit was a Managing Director and Global Head of Fintech Investment Banking at JPMorgan Chase. She brings almost two decades of experience in investment banking, advising companies across verticals in fintech including payments, financial software, neo-banks, and insurtech. Previously, Pandit worked at Goldman Sachs. She received her MBA from The Wharton School at the University of Pennsylvania.

As she tells EPI, dLocal is benefiting from the huge demand from consumers in the emerging markets to engage with global companies. And in so many of dLocal’s 29 markets, there remains a high percentage of unbanked and underbanked consumers.

For Pandit, the core strategy is easy to summarise-deliver long-term value for dLocal merchants, consumers and partners.

Easy to explain but it is harder to execute. To date, dLocal is playing a blinder with its “One dLocal” concept. That means one direct API, one platform, and one contract. Global companies can accept payments, send payouts and settle funds globally without the need to manage separate pay-in and payout processors, set up numerous local entities, and integrate multiple acquirers and payment methods in each market.

dLocal now works with more than 325 global merchants, including e-commerce retailers, SaaS companies and online travel providers. Marketplaces rely on dLocal to accept over 600 local payment methods, as well as issue millions of payments to their contractors, agents, and sellers.

And then there is the client list: that already includes Amazon, Booking.com, Constant Contact, Didi, DropBox, GoDaddy, MailChimp, Microsoft, Spotify, TripAdvisor and Uber.

In other words, dLocal enables those international firms to operate in its emerging markets as if they were operating in their home markets. In addition, it means that merchants can execute local payments and deposit local currency to mobile money and local bank accounts.

While LatAm remains the firm’s core base, dLocal expanded its payments network to include Ghana, Senegal and Cameroon last year and ramped up its operations in Nigeria and Egypt in the past year. It sees huge potential for further growth across Africa. Already for example, merchants selling into Kenya can accept payment from mobile money platforms mPesa and Airtel. In Ghana, merchants can accept payment from mobile money platforms such as Vodafone, MTN, Tigo and Airtel.

The dLocal IPO priced its shares at $21 per share. The shares soared as trading opened to hit over $30 and have since settled at around $32. That gives a valuation of around $10bn. So, it has doubled in value since closing a $150m funding round for a $5bn valuation.

The 3 June IPO was marked by Uruguay’s president Luis Lacalle Pou, who tweeted: “Proud of the success of these Uruguayans! Succeeding in the big leagues!”

With not far off 500 million internet users across the region and a banked rate of only about 40% of consumers and given dLocal’s track record to date, perhaps the dizzying multiples are not quite so excessive as they might appear at first glance.