Naspers Limited (OTCPK:NPSNY) Q4 2022 Results Conference Call June 27, 2022 10:00 AM ET
Company Participants
Eoin Ryan – Head, IR
Bob van Dijk – CEO
Basil Sgourdos – CFO
Larry Illg – CEO, Online Food Delivery & Ventures
Laurent Le Moal – CEO Payments & Fintech
Ervin Tu – Group Chief of Investments, Strategy and M&A
Martin Tschopp – CEO, Prosus Ventures
Conference Call Participants
Will Packer – BNP Paribas
Lisa Yang – Goldman Sachs
Cesar Tiron – Bank of America
Miriam Josiah – Morgan Stanley
Jonathan Kennedy-Good – JPMorgan
Andrew Ross – Barclays
Silvia Cuneo – Deutsche Bank
Christopher Johnen – HSBC
Warwick Bam – Avior Capital Markets
Richard Eary – UBS
Operator
Good day, ladies and gentlemen, and welcome to the Prosus Financial Results Presentation. All participants will be in listen-only mode and there will be an opportunity to ask questions later during the conference. [Operator Instructions] Please also note that this event is being recorded.
I would now like to turn the conference over to Eoin Ryan. Please go ahead.
Eoin Ryan
Great. Thanks, Chris and everyone, for joining the call today. As you have no doubt seen, we have a lot of news out there today and a lot to discuss on this call. So we may go a little bit beyond the hour.
All of the materials for the buyback program, our results, the annual report, the rand report are all on the website. And it’s there that you’ll be able to find a replay, which will be there quite shortly.
On the call with me today, I have our CEO, Bob van Dijk; and our CFO, Basil Sgourdos. And I also have the CEOs of all of the segments. We’ll walk through an update on the financials of the Group for the year, and then we’ll open the call for questions.
Before I hand it over, I just want to reiterate that Prosus is a subsidiary of Naspers, and its financial results are almost completely accounted for in the Naspers results, so to ensure that the shareholders of process and Naspers are provided with the information simultaneously, we’re having one results called focusing on processes results, but where necessary, we will highlight the impact on Naspers.
And with that, I’m going to hand the call over to Bob. Bob?
Bob van Dijk
Thanks, Eoin, and thanks, everyone, for joining the call today. We have a lot of things to cover, so I’ll jump right in. So operationally, financial year 2022 was a year where we delivered strong growth and scale across the businesses and that positions them well for future growth and for value creation.
And when I look at our operational performance and our market trading performance, actually see a very large disconnect, and I think with that comes actually a big opportunity. And that’s why we today announced a major step to unlock value for shareholders. And if we turn to Slide 3, it is summarized in some detail there.
So the discount to NAV has risen to an unacceptable level. It is bad for you, our shareholders, and it distracts us from our strategic priorities. And now we’ve taken steps in the last few years, such as the Prosus listing and the share exchange last year, and while they have not resulted in a discount reduction, I’m confident that over time, they will be beneficial. But given where we are, today’s action creates value for shareholders by making use of the discount.
So what we’re announcing today is the beginning of an open-ended share repurchase program of Prosus and Naspers shares. So we have authorization to begin this immediately, and we will. And we will be asking shareholders at our AGM in August for approval to increase the share repurchase authorization up to 50% of the total issued share capital of Prosus. This will give us the capacity to execute this program at scale.
Now Tencent has been supportive of the withdrawal of our voluntary lockup on our selling of Tencent shares, and we will be beginning selling small amounts of Tencent immediately and regularly in an orderly way, while concurrently repurchasing shares of the Group. So we intend to buy back shares of Prosus and Naspers within regulatory limits and we will do so in a balanced way over time.
And the execution of the program will, in fact, result in a group increasing its exposure to Tencent on a per share basis as well as increasing overall NAV per share. So importantly, we’ve designed a program to manage the number of Prosus and Naspers shares that will be bought back and Tencent shares that will be sold on a daily basis. And as such, we do not anticipate an overhang on Tencent and that would also not be in our best interest.
And the amount sold per day will on average represent a small percentage of the daily traded volume of Tencent shares. So for example, had we executed this program over the last three months within European regulatory limits the resulting Tencent shares that would have been sold on a daily basis would have been, on average, not more than 3% to 5% of daily traded Tencent volume.
I want to be very clear. We remain extremely bullish on Tencent. But at the current discount levels, the Prosus and Nasper boards believe that buying back our own shares and monetizing some of our Tencent holdings in order to achieve this is in the best interest of our shareholders.
And finally, I want to stress that this program presents A lever that we will pull to create value. It in no way precludes us from taking further action to build on the benefits of previous actions to drive a greater degree of simplicity in the Group. And this is something we will continue to pursue.
The program will result in substantial value creation at scale, and Slide 4 illustrates this in a practical way. These examples of the potential impact of the program are based on last week’s closing prices and they assume no change in the underlying discount. So first, selling shares in Tencent and immediately repurchasing shares of the Group will enhance NAV per share for both Prosus and Naspers shareholders.
And we intend to buy back shares of Prosus and Naspers within EU more regulatory limits. And based on today’s prices and levels of liquidity, this would result in more than €10 billion of shares brought back across group or years split between Naspers and Prosus by economic ownership of the free float.
So the example on the right-hand side demonstrates that a €10 billion buyback program would enhance NAV per share by 9% at Prosus based on current prices and discounts. But this is possible because we can sell Tencent shares at market price and we buy back discounted Prosus. So the actual enhancement will vary depending on how the discount changes over time and the overall size, the larger the program, the greater the enhancement. And as we show on the left, when we get to €20 billion or €30 billion, NAV per share improvement would be at around 20% to 40%, respectively.
So a further benefit of the program is that it increases, not decreases our exposure to Tencent on a per share basis with no additional cash outlay as we show on Slide 5. So currently, based on market consensus, Tencent represents approximately €87 per Prosus share. And the left-hand graph illustrates that a $10 billion buyback increases the value of Tencent and each Prosus share by 7%, and that enhancement increases to 16% and 29% at a $20 billion and $30 billion scale.
Now, this value creation made possible because the Prosus and Naspers share count will decline much faster than the NAV, and that results in a sizable increase in Tencent exposure for remaining Prosus and Naspers shares. So this applies even more so to our e-commerce segments where shareholders’ exposure would increase at even larger percentages on a per share basis. And finally, it’s helpful to quantify what we’re solving for.
So every 10 percentage point improvement is worth around $17 billion at today prices. So a 20 percentage point improvement would take the discount towards 40%. And this equates to roughly $34 billion in value creation at that level already. The highlight — this highlights the scale of the opportunity and why we’re making reducing the discount our number one priority. So the Board is aligned with its path and has also adjusted management incentives accordingly, as you will see from our remuneration report we published this morning.
Now I’m sure you’ll have plenty of questions about this announcement in the Q&A. But now actually, I want to turn our attention to our results and to the highlights of a good year for the Group, and those can be found on Slide 8. The first, we delivered a strong set of results with 51% underlying revenue growth in e-commerce despite already being at high scale. Second, we have continued to invest in scaling out adjacent opportunities in each of our segments, while at the same time improving profitability at the core.
And third, while we’re making good progress in building out our segments, we are very aware of how the world has fundamentally changed. And Basil will discuss this in more detail, but in the current environment, you should expect to see us do: number one, prioritize organic investment over M&A and the bar for M&A is very high. We will focus that investment only in the areas of the highest return and we will reduce corporate expenses across the organization.
The fourth, in addition to building substantial NAV, we are also committed to taking action to unlock shareholder value through restructuring and enhancing NAV per share. So over the last year, we returned more than $6 billion to shareholders, and we are committed to continued crystallization in the future as we’ve made very clear in today’s announcement.
And finally, fifth, we will continue to make progress on our sustainability initiatives as you’ll see in more detail in our integrated annual report. Sustainability is firmly a part of everything we do. So our strategy, which you see summarized on Slide 9 has been consistent, and it aims to create and crystallize significant value over time.
So from an invested capital base of about $25 billion, our total NAV is currently at around $170 billion, and this is after a major drop in valuation for Tencent and growth assets globally over the last six months. And a key ingredient for success has been our track record of identifying and investing in opportunities across segments to meaningful value.
We’ve done this many times across multiple segments. And as our businesses are still young, we have focused more on building rather than crystallizing. And going forward, we will be more focused on how best we crystallize value and make the process systematic and repeatable, and again, today’s announcement is a major step in that direction.
So we’ve created substantial businesses and value over the long term. And while our valuation has contracted along with the market, as you can see on Slide 10, we have taken action along the way to lock in value for shareholders, growing NAV per share by 23% over the past two years, as you can see from the right-hand side of this slide.
There are good reasons for the valuation contraction with unprecedented volatility as we face higher rates of inflation and higher cost of capital. That said, over the last three years, the IRR on our current portfolio has consistently been above 20%. And it was there actually as recently as December, and I’m confident we can get back to those levels of return in time.
I say this because despite the volatility, our operations remain really strong and we’re building businesses at the forefront of innovation in their industries. They have significant runway ahead of them to grow profitably for many years to come. So we’re entering a period where great companies will differentiate themselves by balancing controlled investment to lay the tracks of future growth with profitable businesses and cost structures that are fit for purpose.
So in this period, we will be extra careful how we allocate capital. We will set the bar high for M&A returns, and we will ensure good liquidity on our balance sheet. And meanwhile, we will take action to manage expenses and free cash flow generation, even as we invest across the portfolio for growth.
One of the key benefits of today’s announcement is that it will increase shareholders exposed to Tencent, but also to our e-commerce portfolio on a per share basis. As you can see on Slide 11, the portfolio had a strong year with great growth momentum. We will look at each sector in a moment, and Basil will take you through the financials. But before that, I’d like to make three observations.
First, apart from eMAG, which grew only 3% on the back of an exceptional year last year, we actually saw strong growth across all the segments, and that’s despite a challenging environment. Second, the scale of growth is impressive, and it’s further evidence that the investment that we’ve been making is bearing fruit.
In Classifieds, for example, we delivered close to a doubling in revenue. And third and importantly, growth is being driven by growth in the core and new initiatives, but with the core of profitability at each of the segments. So let’s dig a little deeper now in each of our operating segments, and we’ll start with classifieds on Slide 12.
So OLX had a successful year and it leveraged this base of more than 300 million engaged users to produce revenue growth of 93%. This is driven by OLX Autos and an outstanding performance from our platforms in Eastern Europe. The business grew revenue and profitability strongly at the core. The team added much more functionality and tools for car dealers and real estate agents.
We rolled — we also rolled out pay and ship products, which actually gained significant adoption as the year progressed. OLX Autos continued on its strong trajectory and had sold close to 80% more cars year-on-year despite the business being impacted by some COVID restrictions and supply issues in some markets. We’re now selling around 20,000 cars every month and we recently surpassed $2 billion in total car transactions.
If you can take to Slide 13, we talk about food delivery. So after an outstanding 2021 we continued to see strong growth in the business. During the year, the strong momentum continued with restaurant delivery orders and GMV for the total segment up more than 50%. And if you look at iFood only, orders in the last five years — the last five years have grown at a 91% CAGR which is driving the business to scale, and it’s enabling it to experiment with additional value products and services for customers, but also for restaurant partners and for delivery personnel.
As a result, iFood has grown tremendously in value, and we’ve transitioned the business from a profitable but only 3P business to a profitable 3P and 1P business, and that has a significantly larger opportunity set. The center graph highlights how the core restaurant business in Brazil delivered profits after an investment of over $200 million two years earlier.
And levering the strength and relationship with the Brazilian customers, iFood now rolling out convenience and grocery products across Brazil, and the number of dark stores, for example, increased fivefold in the last six months to 90, and iFood is quickly becoming a significant player in Brazil’s grocery industry.
Its early days, but we have momentum and we will build out this opportunity. We’ll do this in the same measured and metrics-driven way that we build out the first-party delivery business, and iFood team has an excellent track record of diligently building great new businesses.
On Slide 14, you can see PayU’s core business is growing strongly across all our markets and especially in India. So our payments segment grew transaction value close to 50% as it benefits from the continued migration of consumer spending online. So it’s mainly in India, but also in its global platforms in Latin America, in Europe and in Turkey. The core business remains profitable, and we are ramping up our credit activities.
While it’s still quite early, the credit business is growing strongly, and it’s benefiting from access to consumers to data and to capital at scale that’s a combination that very few others in the space have. Issuances grew by more than 300% during the year, and we issued about $0.5 billion worth of loans to 3 million customers while keeping delinquency rates below 3%, and that really speaks to the strength of our data scoring capabilities. On the current trajectory, profitability is actually in sight.
Now we’re waiting for the regulatory process to finish for acquisition of BillDesk. It’s an important transaction. And if we’re successful, the combined business will have a DPV of over $100 billion from 4 billion transactions, and we’ll have data on 300 million Indian customers, which is pretty much all of the consumers that are transacting online in India today.
So now let’s turn to our newest segment Edtech on Slide 15, where we have now deployed close to $4 billion on 12 excellent businesses. So the Edtech opportunity is huge globally and the market is ripe for disruption. And I believe our assets are extremely well positioned to benefit from this disruption, and I’m happy to say business grew revenues 55% on average in the last year.
We closed the acquisition of Stack Overflow, and it’s making good progress rolling out this new collaboration product, which is called Stack Overflow for Teams. So Teams is a SaaS product that leverages the unique level of engagement with the software and the developer communities.
Including our other Edtech companies, we now reach 90% of the Fortune 100 across our corporate learning companies. And in addition, we have very exciting opportunities in the K-12 and supplemental space with companies like Biju, Brainly and GoStudent. So education at all levels is ripe for disruption, and we have now assembled a portfolio of assets is growing strongly and that is positioned very well to benefit from this opportunity.
And finally, before I hand over to Basil, I would like to update you on the progress that we’re making in our sustainability initiatives, and that is shown here on Slide 16. So last year, we put in place a sustainability framework that focuses our efforts in areas that matter most, and we made real progress. We took a major step forward to become carbon neutral at the corporate level and our portfolio companies. We achieved carbon neutrality to both reductions and offsets from certified projects around the world. And this year, we will take this further on our journey to net zero.
During the year, we signed up to the UN Global Compact committing to their principles, which align very well with our strategy. The Naspers process human rights statement was adopted by all companies where we have a controlling influence. We also pushed our on-demand platform worker statement. And this articulates minimum standards on fair pay, social protection, working conditions and flexibility across the platforms we invest in.
And we improved our ESG reporting and transparency standards. And our efforts have been acknowledged by prominent rating agencies. So MSCI upgraded us to a AA rating, and Prosus was also recently included in the AEX ESG Index in Amsterdam. There’s much more to come. And here, again, we have the Board’s full support. And you will see this reflected and a meaningful increase in the weighting of ESG objectives in our short-term incentives.
And with that, I will hand over the call to Basil.
Basil Sgourdos
Thank you, Bob. Hello, everyone, and thank you for joining us today. We have a lot to discuss with the announced share repurchase program and another year of strong results. Bob has already addressed the share repurchase program extensively. So I’m focusing on the results.
Today, I’d like to begin by discussing how we allocated capital during the year and how we adapted to the changing external conditions as the year progressed. Slide 18 covers that. In the first half of the year, we deployed $8 billion of capital, 64% or $5.2 billion was allocated to external M&A with 3% or $228 million invested organically in extending our ecosystems.
In the first half, we also deployed just over 30% or $2.7 billion buying back our stock, which was immediately NAV per share accretive. In the second half of the year, as we saw conditions changing, we’ve modified our activity, reduced investment by 40% and to $5 and focused inwardly. The majority, $3.5 billion went to share buybacks, locking in permanent value for shareholders.
Today’s announcement significantly scales the ambition on buybacks, generating sizable shareholder value. In the second half, we allocated just $1 billion to external M&A as valuations continue to rise. In this changing environment, we shifted focus inwards, investing more organically in business models we know well, and where we are seeing good customer adoption and a clear path to good economics and profitability.
These ecosystem extensions we offer can create significant value over time. As you’ve seen from the changes in the second half of the last year, the macro environment is an important consideration in our capital allocation strategy. In the current climate, the bar for major M&A is very high and maintaining good liquidity is important.
We will control costs at the center and in profitable businesses. We’ve seen significant traction in the ecosystem extensions we focused on last year and must build on that momentum by continuing to invest to bring them to scale and profitability years to come. While this will reduce trading profit in the year ahead, there is also a focus on bringing e-commerce to profitability in subsequent years.
So turning now to Slide 19, which provides a high-level summary of the year. Group revenue grew 24% to $35.6 million. And reportedly, our e-commerce revenue grew even faster at 51% year-over-year. Group trading profit of $5 billion reflects the investment to drive further value creation, which I will expand on later.
Core headline earnings per share declined, reflecting a lower contribution by Tencent following the 2% trim of our state in April of 2021 as well as increased investment by our associates, and organic investment in our fast-growing consolidated businesses.
Finally, free cash flow declined due to the increased organic investment in the consolidated business as just mentioned, which also required incremental investment from our profitable businesses and from the Tencent dividends, which continued in the year. Our balance sheet remains strong, and we have flexibility to pursue our strategy by protecting our investment-grade rating.
Turning to Slide 20. I want to give you some insight as to how as to where we are in the life cycle of these businesses and their road to profitability. In each of our segments, we have attractive, profitable core businesses. Leveraging this core, we are extending our ecosystems to auto transactions, credit and digital banking, quick commerce and grocery delivery. These are services sought after by consumers and significantly expand the addressable market.
They leverage a strong and increasingly profitable core and have clear path to profitability themselves. They will ultimately enlarge our cash flow opportunity. At the same time, we are driving profitability and cash generation in the more mature core businesses. The goal is to build a portfolio that will deliver sustainable value creation over the long term. We will take steps over time to crystallize this value that we create for our shareholders.
Moving on, it’s important to highlight that while we report our results on an economic interest basis, to illustrate our proportional ownership of the economics of nonconsolidated businesses, we manage the business on a to-date basis as we’ve shown on Slide 21. The associate businesses within our segments such as Delivery Hero, Swiggy, Skillsoft, minority venture investments make up the majority of the e-commerce losses for the period, but they do not impact our free cash flow.
You will see that minority investments account for 66% of the e-commerce losses and consolidated businesses only 34%. As I mentioned earlier, in the second half of the year, we stepped up investment in our consolidated businesses from $100 million to $400 million to drive value creation across the segments. Organic growth in consolidated businesses is strong at 39%.
And in our minority portfolio still up at 107%. Consolidated revenues account for 70% of e-commerce revenues. The opportunity is significant for each of our business segments, and we intend to invest to take advantage of it, scale the business and then crystallize and return that value for shareholders.
The organic investment in the year ahead will be higher than last year’s investment and will increase the e-commerce trading loss. We, however, plan to counterbalance that organic investment with a different in the M&A ambition to the we’ve had in the past. We’re going to be squarely focused on the current opportunity set and in bringing it to profitability. In each instance, we are investing off a profitable base. We will scale the extensions we are pursuing in our core segments to push and to deliver e-commerce profitability in the aggregate in the coming years.
Now turning to the segments. I want to start off with classifieds on Slide 22, which demonstrated very good growth, well ahead of its peers and improved profitability despite a difficult end to the financial year. OLX continues to perform with strong momentum. Revenue almost doubled to $3 billion and trading profit rose to $25 million from $9 million last year.
Please note that the consolidated view we show here is a pro forma view, removing assets, which were previously consolidated but in which we now own a smaller state. These include investments in letgo, OfferUp, and Dubizzle EMPG. Our core consolidated classified revenues grew 40% to $1.1 billion with a strong improvement in trading profit to $219 million. This was driven by a 7% increase in monthly app users to 120 million users and a 11% increase in monthly paying listers.
Avito grew its revenues 55% and trading profit 32% to $631 million and $220 million, respectively. Operating in Russia has become untenable, and we are in an active process to sell Avito. The remaining portfolio is robust and growing strongly. We will adjust the cost base of OLX to reflect its overall reduction in size. OLX Europe grew revenues 24% to $432 million, with Poland contributing 60% of that revenue. European trading profit reduced modestly to $95 million to facilitate our investment in pay and chip services, which have ramped up quickly, recording over 2 million delivery transactions each month during the second half of the financial year.
Due to the onset of War, we recorded negligible revenues in Ukraine during March, but we continue to support the business and expect a slow recovery. OLX Autos reported revenues of $1.6 billion, up 173%, partly driven by higher prices but also by accelerating the business-to-consumer proposition and consumer financing. It’s a young business, and we’re investing deliberately to scale it, but the team has delivered an 8 percentage point improvement in trading margin.
As you can see on this slide, core classified business is solidly profitable after investment over the years. We expect the same with OLX Autos in time. We’ve already made substantial progress in that regard this year. The U.S. Autos business which represents more than 35% of OLX Autos revenues more than tripled revenue and became profitable in the prior financial year.
Turning to food delivery on Slide 23. Despite investments, trading margin remained flat year-on-year. Order, GMV and revenue growth remains very healthy. And the slower rate of growth is as a result of lapping very strong COVID tailwinds. Trading losses rose to $724 million, primarily reflecting the increased investment in convenience and groceries from our associate investees.
As I mentioned earlier, much of this is already prefunded given our investment in Delivery Hero and Swiggy. On a consolidated basis, the level of investment is much more manageable. The consolidated investment reflects our investment in IT, which continues to drive growth off a very high base.
Revenue grew 29%, driven by 35% growth in orders to more than 730 million orders, and 41% gross merchandise value to $6.9 billion. iFood has performed very strongly and grown mainly in value over the past five years, driven by well-timed, well-placed and disciplined investment. 2017 and 2018, we scaled the pure marketplace or 3P business to profitability.
We then recognized early and invested in the 1P opportunity to grow the size of the market and our position in it. Profits dropped year-on-year due to the increased — sorry, profit dropped slightly year-on-year due to the increased marketing spend early in the current year to reinvigorate the customer base as the market exited the pandemic lockdowns and restaurants reopened.
The core business is poised to deliver profit improvements in the future. So while the core scales its profitability, we’re taking the same approach we took investing in 1P with the quick commerce opportunity, which presents us once again with an opportunity to grow the market as well as our share in it.
The folks moving on to payment on FinTech on Slide 24, where you will see that we continue to deliver positive results across the business. Revenues grew 45% and to $796 million, driven by a strong performance in the Indian and global payment business and a strong recovery in the credit business. The segment’s overall trading loss margin improved 4 percentage points as trading losses reduced from $68 million in the prior year to $60 million and as we delivered good top line growth.
Increased profitability at the core payment service was partially offset by investment in credit and new initiatives in India. The core consolidated PSP business reported revenue of $643 million, up 37% and a trading profit of $28 million. The total payment value grew 47% to $79 billion, as faster digitization across markets continues to benefit PayU.
India, our largest market, grew its PPV by 66% to $43.8 billion representing a compounded annual growth rate of 54% over the past two years. The Indian PSP business has provided a strong valuable base of which we can build our credit business.
Following deliberate conservative issuances in the first half of the year, India has witnessed a strong recovery as we picked up momentum in personal loan dispersals in the second half of this financial year. We have a preapproved base of 62 million users and 45,000 active merchants. Transactional credit has continued to see good traction while collections have maintained a strong trend across all our credit products.
So let’s turn now to Slide 25. And there, you’ll see Edtech performance, which remains on track and we’ve made substantial progress in expanding the portfolio. During the year, we acquired a stake in Skillsoft, which is public and Stack Overflow and GoodHabitz. This positions us well within the key enterprise education market. Our share of Edtech revenues grew to $425 million.
After isolating the impact of M&A, this represents a 55% growth. Our share of trading losses has increased to $117 million, reflecting the additional Stack Overflow and the increased investment at Bates to expand its operations. We own just under 10% of Byju. Education remains a significant and high potential sector. We remain very excited about the potential for value creation in this segment.
So on Slide 26, we reflect core headline earnings, which is an indicator of the operating performance of the Group as it adjusts for non-operating items. First, due to lower contributions from associates and then Tencent’s contribution decreased as well as we tripped our holding in April 2021 by 2% to 28.81%, and of course, we also saw the increased investment by our other associates that I spoke about earlier. Second, we increased investment in our consolidated businesses. And third, we raised significant incremental debt, resulting in increased net finance costs.
So moving to Slide 27. The free cash flow decline reflects the investment across the consolidated business during the second half of the year. Working capital investment also increased, reflecting the very strong growth of our credit and our auto businesses. Over time, we expect to generate substantial cash flow as we benefit from operational gearing from both of these businesses.
Generally, we operate CapEx-light businesses. However, this year, we’ve invested to expand capacity at eMAG by investing in the new warehouse and in for locker throughout Romania to enhance delivery. Finally, Tencent remains a meaningful contributor to our cash flow via stable and an increasing dividend rate. Dividend from Tencent grew 25% to a sizeable $571 million.
So moving on to the balance sheet and funding of the business on Slide 28. Investments have been funded from upstream dividends, asset sales and more efficient use of the Group’s balance sheet. We ended the year with a strong and liquid balance sheet, comprising $13.6 billion in gross cash. During the year, we raised $9.25 billion in bonds at very attractive interest rates, further enhancing our financial position, improving our liquidity and extending debt maturities.
Apart of those proceeds were used to settle $1.6 billion of 2025 and 2027 notes. The Group has no debt maturities due until 2025. And 95% of our debt is only due after five years and about 40% due after Tencent. Following the unbundling of JD.com by Tencent, we received a 4% effective interest in JD.com in March of 2022. As Bob mentioned, JD.com is not a strategic asset for us, and we have, therefore, subsequently sold our stake for net proceeds of $3.7 billion.
We will retain the proceeds to strengthen our balance sheet, enhanced liquidity and thereby improve our credit profile. Debt capital remains incredibly important to the business. We’ll continue with our ambition to manage the balance sheet with an investment-grade rating. If it becomes necessary, we can consider taking action to reduce debt load.
In closing, it’s clear we’re going through a period of unprecedented volatility. Despite this, our operations remain strong and on track to deliver substantial revenues profits and cash flows well into the future, generating significant value for our stakeholders. Our priority is investing in our existing businesses to scale them further and drive them to profitability in coming years.
We’ll also continue to drive profitability at the core in our established e-commerce segment and take action to manage expense this year and at the center. Second, we’ll remain disciplined in our capital allocation decisions as there is now a high bar set on investments. Third, we remain confident in the future return potential for Tencent.
Today’s announcement will actually increase our exposure to the Company and tether us more closely to its future success. Fourth, our balance sheet remains strong even as we repurchase shares, and we remain intent on managing the balance sheet within our investment-grade ranging. And finally, we are fully committed to taking action to bring down the discount.
I’ll now hand back to back to Bob to go through our thoughts for the future.
Bob van Dijk
Yes. Thanks, Basil. And before I add the questions, I’ll summarize on Slide 30, our key priorities. So first, as you can see from today’s announcement and the way we continue to scale our business, we’re fundamentally committed to reducing the discount, and we will continue to build NAV and take action to enhance NAV per share over time.
And second, the fundamentals of our business remains strong, and they are indeed strengthening, and we will continue to invest across our portfolio to build more valuable businesses.
Third, we have already adjusted to new market realities. So we’re setting even higher targets for M&A returns, we preserving liquidity, and we’re taking all actions to manage expenses and free cash flow generation.
And fourth, we will work towards the crystallization of value through a transparent, predictable and repeatable process. Now fifth, we will continue to drive sustainability initiatives within our business.
And our commitment to these priorities runs from the Board through management to the entire organization. and have also been reflected in the remuneration policy of 2023. So, the policy prioritized value creation, discount reduction and sustainability.
And so with that, I want to thank you for your time, and let’s open up for questions. Chris?
Question-and-Answer Session
Operator
Thank you very much, sir. Ladies and gentlemen, we will now proceed with question-and-answer session. [Operator Instructions] Our first question is from Will Packer of BNP Paribas Exane. Please go ahead.
Will Packer
Firstly, today’s news of buybacks is very welcome, but you’re selling down Tencent to finance it and Tencent has been the major driver of evaluation at Naspers and Prosus. What is Prosus’s right long-term holding in Tencent or perhaps to put it another way, what is the minimum holding you should have in Tencent considering the quality of the asset and your Board seats, et cetera?
Secondly, you’re talking to an open-ended buyback, while it is account elevated. What does elevated mean I’m sure you can’t give us a number, but how should we think about the term elevated?
And then finally, how should we think about your appetite for larger M&A deals in the context of the discount? It sounds like you’re more focused on your current footprint and, therefore, more cautious, but would be good to have some color there?
Bob van Dijk
Yes. Thanks, Will, for those questions. I think I’ll probably take all three of them. So let me start from the opposite order. I think the appetite for larger M&A deals, look, I think the way we said it is the way we think about it, I think the bar is high, right? So we — for us to make significant external transaction, it has to look exceptionally good in terms of return and value creation. Having said that, we do look at opportunities that are out there, just the bar substantially higher, I think investing in our own business, which we know well is something that we are more comfortable with.
Then your second question is around what is elevated. And basically, there’s a few things to say about it. So first of all, the current level of discount is unacceptable, and we want to reduce it meaningfully, right? And our intention is to keep this program running at scale within MAR limits. And initially, we won’t even look very much at the level of the discount. And longer term, I don’t want to say at what level is just that’s for the market to determine. But we’ve given you an indication of how important it is for us and the levels of value creation at certain levels of discount reduction.
So as I mentioned, the 20-point reduction would bring the discount down to about 40% of the result and $34 billion of value creation. Now you can remember that this is where — this is a level where we’ve taken action before, including buybacks to create further value. So that’s a room of value creation and the repurchase program is a powerful way to create value. And ultimately, a number of variables, including market conditions will affect the decisions. And look, it is a unique transaction. There’s not many direct residents, and it’s a volatile market. So we’ll observe how things evolve.
Then to your first question, the purpose of what we announced today is to basically make use of discount in our share to create value for shareholders. The objective is not to reduce our holding in Tencent. So there is not an objective to reduce Tencent at all. In fact, I think we’ve emphasized it quite a bit. The Tencent look through per share actually goes up. So it’s — there’s no objective to reduce Tencent, it’s quite the opposite, right? If I look at the strength of the business, the strength of the leadership team and the medium-term potential of the market, we’re extremely bullish.
Operator
The next question is from Lisa Yang of Goldman Sachs. Please go ahead. My apologies, ladies and gentlemen. The next question then is from is from…
Lisa Yang
Yes, thanks for taking my question. The first one is on the current operational trends. Can you comment on the trends in so far since the end of March, clearly, having impacted the war inflation macro? Any update would be great. Also, I’m just thinking many of the assets have never been through a true recession. So how do you think you’re very faster to perform in a much weaker macro environment, which assets will be more vulnerable versus the most resilient? That’s the first question.
The second one is on the complete landscape. I was just wondering if you have seen any major trends yet in terms of behavior from your competitors given increased difficulty to access capital. Do you expect to see at some point more consolidation or rationalization? And how do you expect poses competitive position to come out of all of this?
And the third question is on the cross holding structure. I’m just wondering how you think that structure is going to evolve, especially after all these by also process on 49.5% of Naspers today, and I think you need regulatory approval to go beyond 50%. So how does that limit the ability to you can do to simplify the structure would be great?
Bob van Dijk
All right. Thanks, Lisa, for those questions. I think the last question I will ask Ervin to answer, but I’ll deal with your first two, that’s okay. So I think operationally, the business has actually done well since the beginning of the year as thermal started unfolding. You’ve seen three months of those results. And I would say we started the year well as well. If you look at sort of the immediate problem of inflation, there’s a lot to say about how we’ve been dealing with inflation.
First of all, as a company, the Western world is been also used to inflation, we are quite usually dealing with inflation, right? So we have a strong resins in Turkey, and in Argentina for many years, and those are markets that have been dealing with very significant inflation, and we have both a strong PayU and an OLX business in both those markets that have actually just done absolutely fine in many years of inflationary environment. So I think those business models can operationally manage that quite well, and we probably have more experience than a lot of other lot of companies in dealing with a high inflationary environment.
Then I think one other thing to think about with both inflation and economic pressures that a lot of the business models were in actually make effective use of providing an online service that is often more cost effective than the off-line alternative. And I think EdTech is a good example, right, where people can upskill themselves typically at a much better price point than an offline education.
So if people feel the pinch actually, I think, lower-priced alternatives will look better rather than more challenged. So I think a lot of our online propositions typically will look better versus price increasing off-line propositions. I think, the final thing to say, and let’s maybe turn into your second question, Lisa. That’s around, do we see major change in behavior consolidation?
Well, in some parts of the business, we are, right? I would say for example, in quick commerce, we see some shakeout happening. People are rationalizing. I intense competitive environment that we were in, is somewhat — it’s somewhat more normalized. We see it in some places in the food business as well, where competition has been extremely high in the past where now I think more rationality has taken over.
But it will actually lead to consolidation in market remains to be seen, but we’re already seeing that sort of the competition that was at very elevated levels is now just good competition. So I think that is that is a difference there. And maybe, Ervin, do you want to talk about the loss point?
Ervin Tu
Sure, Bob. On simplification, I think you heard Bob’s comments earlier that today’s program, the important announcement today with respect to the share repurchase represents a leverage to create value, but doesn’t preclude, in any way further action and simplification put simply is very much on our mind. I would just say today, what we can share with you is that, of course, we are continuing to work on evaluating those levers. And when we have more, we will come back.
Operator
Thank you very much. The next question is from Cesar Tiron of Bank of America. Please go ahead.
Cesar Tiron
I have three that’s okay. The first one, can you please explain to us what has been the trigger for the Board to approve this buyback scheme and would that mean that the Board is not willing to consider options that were not on the table in the past couple of years for future actions as to how the portfolio of the Company managed in the future? I think it’s an important question, and it’s very difficult for us to assess that since we don’t hear offer from the Board. So appreciate your help in providing any color on it.
The second question today’s announcement on buybacks, I think it’s also really about capital allocation. So I’d like to ask about BillDesk, is the transaction still under regulatory review and either any time line or from a capital allocation standpoint, it doesn’t make sense to pursue the transaction especially given the changes to Prosus valuation since the transaction was announced?
And the final question is really — sorry, a few technicals on the buyback. I just wanted to make sure that 100% of the Tencent sell proceeds will be used for buybacks and nothing else, and also if the proceeds will be split 60-40 between Prosus and Naspers? And if so, why does Naspers need to potentially sell Prosus shares to conduct its buyback?
Bob van Dijk
All right. That’s a mouthful will try to deal with the questions as well as we can. I will answer the first one, and I’ll start on the second one and Laurent, who is on the call, can maybe add there. And I’ll ask Ervin to talk to the third technical questions on the on the buyback. So what triggered the Board? Look, I think it’s clear that we are in a different space today than where we are, right?
So the discount is at an extremely high level. And I think that is something that the Board is extremely aware of. And I think the it’s important for us at these levels to really make sensible trade-offs between what kind of returns would you get on investing capital in M&A versus doing buybacks in your own shares. I think we had excellent discussions with the Board, and the Board is very aware of how shareholders are thinking about this, and it’s obvious that we are in a place with an unacceptable level of the discount.
So that, I think, convinced our board that this is the right thing to do for our shareholders at this point in time; and as I said, look, it effectively results in the number of Tencent shares per share actually going up. And so this is something that makes us of the existence of a large discount while underlining our confidence in Tencent, which I think is also important for our Board.
Then on BillDesk, I think it’s important to say, look, we’re in the approval process and the business case that we made and that we had a discussion on with the team was always that is driven by a long-term DCF view and very substantial synergies. And those synergies are in a number of areas. They are in building out our credit business. They’re also in sort of cost effectiveness high rates and the complementarity of our different businesses.
And yes, the markets have shown change, but actually, the business plan, the fundamentals that underpin the value creation that we signed up for when we did that acquisition have not changed at all. So it was not a multiples based story, but it was a fundamental DCF-driven business case with exceptionally strong synergies that are a solid today as they were then. But Laurent, I know you’re on the call, anything to add?
Laurent Le Moal
Yes, Bob, thank you. Indeed, the strategy rationale has not changed. In fact, it’s even reinforced. Please remember all you know that the proposed acquisition of BillDesk was driven by the necessity to get to scale and also increase really the growth of the roll revenues, but also significantly change the profit profile of the overall combined entity.
And as of today, BillDesk continues to perform in line with our expectation. Therefore, we still continue to be very excited about the proposed combination of the two businesses. You mentioned something about the current approval. Yes, correct. This is still being considered and reviewed by the Competition Commission of India. And we do expect a definitive answer from them during the summer.
Bob van Dijk
Yes. Thanks, Laurent. And Cesar, would you mind repeating your third question? We just want to make sure, I think it has…
Cesar Tiron
Sorry about that. I wanted to understand if 100% of the proceeds from initial sell in Tencent will be used for buybacks and nothing else? And if the proceeds will be split 60-40 between Prosus and Naspers, and if so, why does Naspers potentially need to sell Prosus to conduct its own buyback?
Bob van Dijk
Thanks now got it completely. Ervin, you can have a go, and Basil and I can support as necessary.
Ervin Tu
Cesar, it’s Ervin here. So the answer to your first question is yes. In the initial phase, we will be devoting 100% of the proceeds to buy back. And the answer to your second question is also, yes, the buyback will be in accordance with the proportionate effective interest of the fleet approach free float shareholders for each listed entity. And then in terms of why? You noticed that we said we may need to sell Prosus shares to fund the Naspers buyback.
That’s a pretty technical question. It relates to some of what we need to work through in terms of how we can ultimately fund the Naspers portion of the buyback. And I’d just say that there are some limitations on being able to do that. So we need to leave that channel open should we need to use it later to be able to affect the Naspers buyback. That’s probably less specific than you want, but it’s a pretty technical question.
Operator
Thank you. The next question is from Miriam Josiah of Morgan Stanley.
Miriam Josiah
Firstly, in the presentation, you mentioned you’re looking at systematic and repeatable ways to crystallize value. Can you just share more detail on what this means specifically when it comes to things like IPOs or potentially monetizing other listed noncore stakes? Does this become more of a priority? And which assets would you say are closer to crystallization or perhaps if you could share a time line for that?
Then secondly, just on funding. Clearly, a lot of discussion on that at the moment. Are there any businesses in your portfolio that need more cash imminently? And have your views on where to deploy that capital within your portfolio changed thinking about more sort of capital-intensive businesses like OLX? Does that become sort of less attractive investment in this environment?
And then finally, just on your capital allocation priority longer term. If you could sort of talk about where this buyback fits in compared to M&A, given that’s the discount to an acceptable level. And interest rate settle? Does the balance shift back to M&A? Or is this still a priority, if you could just talk about sort fit in?
Bob van Dijk
Yes. Okay. Thanks, Miriam, for those questions. Let me try to cover all three of them, and other people can jump in as needed. I think Larry, you may want to comment on, and Martin Chuck, if he’s on the call, may also want to comment on funding needs we see. When it comes to sort of systemic value crystallization, I would say that we’ve, as a company, been, I think, quite good at identifying opportunities and growing them, but crystallizing and returning value to our shareholders, I think we’ve done less off over time. And I think we are mindful of that. We think that, that is something that we want to prioritize much more going forward.
An example is actually what we’re doing with this program today, right? So we’re using our Tencent investment to effectively create value for our shareholders. But I think also going forward, it can take the form of listing assets, sale of assets or any other sort of market transaction that would bring that value customization to you, our shareholders. And look, I could go and speculate about each of our businesses. I think that’s not the right thing to do here. I think many of our businesses, particularly given that they’re profitable in the core think over time, that would be good candidates to think about what the right future may be. But I don’t think I want to go into the specifics of individual assets here.
Then your second question was around funding. Are there any of our companies that need cash imminently? I would say, particularly the ones that actually use quite a bit of cash that are typically associates, right? So you will know them in the food space. There’s a number of them. I think they are typically well funded. Some of our controlled assets are investing, but we’ve actually made a number of very careful decisions to make sure we — when we do invest our cash in our controlled businesses we only prioritize those investments that we’re absolutely convinced that will get us an excellent return.
So I think on the external side, at least, the bigger associates I think, are largely well funded. On the internal side, we’ve made a very strong prioritization to invest in those initiatives that we’re very confident of. And indeed, if there were areas where we were somewhat less confident, we’ve actually pared back our internal investment proposals quite considerably already. So I hope that answers your question, but maybe Larry, Martin, any comments on associates or venture businesses that need cash.
Larry Illg
Nothing really to add from there, Bob. I think you covered it well. I think the — obviously, we paid close attention to the funding needs of the — on the food and education side of the companies that consume a lot of cash, including modeling what might happen. I think one of the questions earlier very close to what might happen should inflation increase, should we enter into a prolonged recession and see how that might impact capital needs. But I think by and large, our cash-consuming companies are well capitalized?
Martin Tschopp
And maybe on the funding side, I think so remember, the open-end buyback is, as Ervin answered earlier, funded by Tencent sell shares. So that’s paid for, right? And then I did cover in my script that we have a very healthy balance sheet, and we’re preserving liquidity, right? So we can pursue the strategy that we need to and we have the balance sheet to do that.
Bob van Dijk
Yes. And maybe, Miriam, on the last question around capital allocation, I think there’s a few considerations here, right? So first of all, given where the discount is, a buyback at scale makes a lot of sense. That’s why the Board approved it, and that’s why we’re going to allocate this big bazooka program as long as it takes. But I think the world has also changed in the sense that because of rate increases, we see cost of capital go up.
And that’s — well, it may come down over time, but I think it’s a reality that just makes the bar higher for — particularly for external M&A. Indeed, that may normalize over time. But I think for the time being, that’s just the reality we’re dealing with I think it also means that we need to control our costs because spending money is more expensive than it was previously.
I think the final thing that it means for us, and that’s may change over a number of years maybe. But I think the way I see the next few years is, one, it’s a period to get our e-commerce business to profitability. And that’s the path we’re on. And I think that’s the part we’re going to stay on because I think that’s how the market context looks at what they want from these businesses, and I know we can deliver on it, and that’s what we’re going to do.
Operator
The next question is from Jonathan Kennedy-Good of JPMorgan. Please go ahead.
Jonathan Kennedy-Good
First question from me is related to the regulatory approvals, Naspers may need to repurchase its own shares if those discussions commenced at the various levels, I presume with South African authorities? It’s question number one. And then I noted that you’ve as shareholders approve up to 50% repurchase of total share capital at the Prosus level. And it suggests there may be a very significant buyback in the short run. Just wondering if you can provide some color on that 50% number and what the equivalent request at Naspers in terms of by that authorization?
Bob van Dijk
Yes. So Basil, maybe you can cover the first question while I’ll start on the second. So we want to make sure we have sufficient headroom to buy back shares at Prosus level, right? So that’s why we are going to — I think the current approval is at 10%. And we think we’re going to run into that, and that’s why we’re going to ask for more approval. And we expect to run this program at scale as long as the discount is wide, right? Obviously, with regulatory limits, but that’s the plan we have for which we need space to do that. I’m not entirely sure what the authorization levels are at the Naspers level. I know they’re higher. But maybe Basil, you know that as well.
Basil Sgourdos
Yes. So, the changes we are making to the authorization levels will allow us to continue, as Ervin outlined earlier to buy the stocks in relation to the free float holdings. So 58% towards the AAX free float and 42% towards the JSC free float. And we will sustain that. So don’t read anything into. It’s not like we look to change that that split. We want to sustain it through the program. And then the regulatory approvals, it’s a process that’s ongoing. And I also don’t expect there to be an issue where we can buy back Naspers stock, but we have to go through the Prosus. I can’t prejudge it. And once that is done, we’ll come back with a clearer color on that.
Operator
And the next question is from Andrew Ross of Barclays. Please go ahead.
Andrew Ross
I’ve got three as well, if that’s okay. Just wanted a quick update on Avito and where you’re at in the sale process of the asset. Could you give us a time line? And ideally, if you are able to sell it, what should we be thinking about in terms of use of proceeds? Can you take money to the holdco level? And how do you think about using those proceeds?
My second question is, you talked in the presentation about reducing the corporate footprints. Can you just give us a bit more color in terms of what that means? So I assume it doesn’t mean leading assets, but more thinking about the central cost charge and perhaps other areas of cost, but a bit more color that would be helpful?
And then the third one is a theoretical one on Tencent. Obviously, you’ve announced today a series of small sales of Tencent going forward on a daily basis. But is there anything that’s been agreed that would, in theory, prevent you from selling a bigger chunk of Tencent again, like you did in 2018 and 2021? I appreciate the language in M&A is for big deals at unlikely right now, but things can change, and it’s important to understand the theoretical funding position of the Group?
Bob van Dijk
Yes. Okay. Andrew, let me start and see how far we get. On Avito, what we communicated is that we are looking for an appropriate buyer, and that process has kicked off. We’re trying to do that in an expedited way, but obviously, it takes a bit of time. So I can’t give you a very precise time line there, but the process is going and sort of what happens with funds depends on who buys it.
So I can’t really comment too much on that either at this point in time. In terms of reducing corporate costs, I think that will take a few directions. So one, we are reducing the number of people we have in corporate positions. We’re also making a number of remuneration changes that should make a real dent as well. So it’s more that rather than getting out of businesses which is not something we think is the right thing at this point in time.
And the last point, I think, is probably best answered by saying that we have a very strong balance sheet. If we want to do further in M&A, we can do so if we wanted to do even further M&A, which I think is given where we are, not likely we can also find ways to fund that. So I think we’re in a position where I think we will not do less large M&A rather than more. But if we are convinced you’re going to get an absolutely exceptional return, we have plenty of options to fund that.
Operator
Thank you very much. The next question is from Silvia Cuneo of Deutsche Bank. Please go ahead. Please go ahead.
Silvia Cuneo
I have just two. The first one is regarding the buyback. Are you in a position to comment more about the brands size you are thinking about in FY ’23 based on the examples in the slide, it looks like starting point could be around $10 billion, so above the $5 billion size we have seen you committing to the prior programs?
Then second question is on the longer-term outlook. We see in the slide, you talk about how you aim to bring the e-commerce portfolio to profitability in aggregate. Just wondering if you can talk a little bit about what time line you are thinking about? And if you could share any indications of tough to breakeven for the different segments?
Bob van Dijk
Yes. No, thanks, Silvia, for those questions. So I wouldn’t anchor on the $10 billion, right? There is no end date on the propose program. There’s also no size limit on the program. So I would not want to give you guidance on that, right? So we basically say, look, there’s an elevated level of discount. It’s very elevated now even if it comes down it’s still elevated. We need to structurally address it. That’s why we come with an open-ended program and other limited program.
So the intention is very much that this is a a structural way to address this, not a limited size, limited time program. So that’s very important. The fact that we give you examples, we also put a number of $30 billion in there. So I wouldn’t anchor myself the fundamental concept this year is that there is a dislocation in the market. As long as it exists, we will continue to make use of that to create value for shareholders at scale. So that, I think, is what I can say around size.
Then on the longer-term outlook, profitability, look, I think the most important point, I think Basil said it, I said it, actually if you look at the core of our segments, they’re profitable already today, right? So that rolls for OLX, that holds for pay and it works holds for iFood. So if we would want to make this business profitable in its entirety, we could do so very, very quickly. The reality is we’re also investing in some new growth areas that we think are extremely exciting, and we’re seeing a lot of progress.
For example, in auto transactions, we see excellent development of unit economics and, frankly, tremendous growth, and the team that is executing it is doing it in a very disciplined way. Yes, we’re in the investment mode, but we think it’s absolutely wonderful extension of what we’re doing already. And very similar for grocery and food, right? So we’re growing. So it’s costing some money, but the unit economics for particularly stores that have been around for a while, just look excellent and the same in credit for PayU, right?
And the exact path of how the segment adjacencies will get to profitability will be a bit different. But I think actually, the fact that we’re getting a more rational competitive environment should actually help them, right? So this is not a many-year thing. It is a few year thing where I think the how exactly it will pan out. It depends a little bit on competition. It depends on a few things. But it looks extremely healthy for us to get there. And again, at the core, we are already there.
Operator
Thank you. Thank you. The next question is from Christopher Johnen of HSBC. Please go ahead.
Christopher Johnen
So, I mean, a big one for me on the slides. You used to have the $100 billion NAV target for the e-commerce segment by the end of 2025. I haven’t seen that yet. I just wanted to confirm that this is still — or whether this is still a goal for you or not and how you’re thinking about it, whether the current market environment should see maybe a delay of the target or just the general use here?
Bob van Dijk
Yes. Sure, Christopher. So yes, it is still a goal. Unfortunately, like most of the markets, we’ve taken a step back on reaching that goal. We’ve seen obviously meaningful corrections like all of high growth in technology. But if I look at the fundamentals, Christopher, I actually — and I sometimes say this to smart shareholders I speak to.
I have never seen a bigger discrepancy in my life between the scorecards I look at every morning and Bloomberg in the sense that the operating performance of virtually every business we’re in is looking healthier than it did before. The unit economics are looking extremely healthy — the only thing that is not looking very healthy is the multiples and the market scorecard.
Now that one that reverses is, frankly, your guess and my guess, if we could predict it very carefully, we’d probably be very, very rich. But the fact that we’re seeing operational performance be so extremely strong gives me a lot of confidence that we’re on the path to achieve that. Exactly when, I guess, the marketplace a big role in that. And I think, yes, the market surprises me regularly, so I can’t really say anything about that.
Christopher Johnen
That’s very clear. One more follow-up. I mean, the sheer number of listed equity stakes in your holding have gone up quite a bit, obviously, a number of IPOs. How are you thinking about just the sheer amount of those investments in public listed equities?
Bob van Dijk
Yes. So I can say a few things about that. I think the — for me, whether a company is listed or unlisted is not a deciding factor on whether we see the right value creation, right? Tencent has been a listed company for a long time, and it’s been actually since listing one of the best investments ever done by any company.
And many of our shareholders, I think, are very happy we held on to that position, the public position I think also we have a number of public positions that are extremely strategic, right, where both we learn a lot example, in food delivery, I think our Delivery Hero position is one where we learn a lot from what Nicolas does.
And on the other hand, I think we can also be as a participant really helpful for him to shape his strategy. We’ve been there from the pre-IPO days, right? We were there from before IPO. Again, we see tremendous value creation potential in a business like that, probably have a much closer understanding of where our business are being undervalued.
And we feel good about actually using your capital to create value based on the understanding, the deep understanding we have of these businesses. Now there are also, I think, some businesses that might be less strategic where we — where, obviously, it’s easier to to monetize the position over time.
And we look at that very careful, actually, Ervin has with Evelyn build a team that does specifically that look very closely at our public positions and make sure we’re always making the right trade-offs. Is it strategic? Do you believe in substantial value creation, if not, should we be the long term on that? So I think we’ve become more disciplined and programmatic about those, but the questions are really around strategy — strategic fit and value creation potential.
Operator
Thank you very much. The next question is from Warwick Bam of Avior Capital Markets. Please go ahead.
Warwick Bam
Just two questions from me. Just want to get a sense of the margin outlook for core classifieds based on the existing user adoption of pay and ship. Are you currently charging a fee for Pay level, can you give us any steer as to what the absolute trading losses will directionally be in FY ’23 will increase or decrease?
Bob van Dijk
All right. So I’ll answer your second question and I’ll ask Romain, who I believe is on the call to cover your first question on the margin outlook for OLX. Look, you know we don’t give guidance, right? And we don’t give guidance for a reason, not because we’re bad people who don’t want to tell you anything, but there’s a fair amount of uncertainty, right?
We have a very large chunk of our e-commerce trading result comes from associates that we don’t control, right? And I think for many of those associates, I think they are on a path to profitability that it may have accelerated in the last few months, maybe not. It’s hard to say, right? And I think in our core business, the ones that we do fully control I think that there’s also there, the sort of three dynamics that are playing.
On one hand side, we’re investing in adjacencies we believe in. So we’ll do that investment. On the other hand, we have a core that is profitable where you’ll see more profitability come out. And then third, there’s a competitive environment, right, where if the competitive environment forces you to invest hard, then it’s the wise thing to do. So it’s really quite difficult to give you an answer not because we don’t want to, but because there’s a lot of dependencies there.
But I think if you look not five years out, not anything like that, but in a relatively short number of years, then I can see a very clear path to profitability. I think that I can tell you exactly what happens in the next 6 months or 12 months, there’s just a lot of dependencies that you don’t necessarily have control of.
Basil Sgourdos
And to your first question about margin outlook. So the first thing is you will all have noticed that the margin of OLX Europe decreased year-on-year to a still very positive 22%. This margin decrease is due to several factors. One of them only is pay and ship. We all have to understand that pay and ship is at the beginning of a journey, right. The first focus we had was really to scale a product, but could be adopted massively by most of our customers. That couple of very interesting things we’re seeing in pay and ship.
First, a significant uplift in the retention and the use of our platform by people that have been exposed by pay and ship versus the ones that have not been exposed by pay and ship. Secondly, an increase in our ability to monetize a population that previously were using our platform mainly for freight. So there is a clear monetization aspect there. And the last thing I’ll say is the growth adoption that you’ve seen on pay and ship and that we’ve shared with you three time type of multiple has been a proof of concept for us, but there is a strong demand.
Now this has come at a cost, and we wanted to make sure we could invest and scale quickly. to make sure we were positioning our still very clean in that market and creating a strong customer expense. We will keep on investing in terms, but we have a clear path to profit when it comes to monetizing that new product and making sure we can actually increase the overall profit of the platform. So long story short, probably another — some time of investment but a clear path to profit. And bear in mind that we scaled it we are just at the beginning of monetization. So there is still a lot of upside to come.
Operator
Thank you very much. Ladies and gentlemen, we have time for one real question. The question is from Richard Eary of UBS. Please go ahead.
Richard Eary
Actually three questions, if I may, actually. Just the first one in terms of actually funding the buyback. I think within the accounts that you talked about an LTV are basically 10%, but obviously, you can end that to 15%. So I’m just trying to understand, as we look at that trying to get the ratio of how much is funded through internal cash versus Tencent stock, how we should think about liquidity measures as a benchmark? Just as a simple thing, that I was doing on the first couple of slides in the deck when you discussed the NAV, which you mentioned was $169 billion, you take down $10 billion that goes to $159 billion. And then you did the $159 billion over basically $15.7 billion of existing gross debt plus whatever you sell, it implicates if you go — if you don’t go over 10%, you have to sell quite a lot of Tencent stock to do that, so I’m just trying to understand ability around that measure about whether it’s really 10% or 15%, so we had a better understanding of how that funded?
The second question is that just going back to your view that you wanted to maintain the same ratio. So am I correct in thinking that you don’t want to change the economic interest in Naspers and in Prosus? Or is that something I’m misreading? And therefore, there is a chance that you can reduce Naspers stake in Prosus, which therefore reduces your tax yield or increases your tax yield, that’s the second question?
And then the third one, when you say preclude further action, I mean, can you just maybe outline what you mean by that statement? And what you see as the ultimate structure for the Group? So that would be the three questions.
Bob van Dijk
Yes. Thanks, Richard. On the third one, I can answer that. Look, we’ve spoken previously about sort of the range of options that we looked at. I don’t want to speculate on where we come out there. I don’t think that will be wise at this point at all. We are on day one of, I think, one of the most significant transactions that we’ve announced where I think that is not ready for prime time. We will certainly want to talk to you about that later. But I don’t think we can actually do that today. Basil on the change in economic interest and the impact on the tax yield, I hope you have the answer because I don’t.
Basil Sgourdos
I’ll deal with the first two questions, Bob. Rich, thanks for been very explicit. The buyback is funded solely from the sale of Tencent. So 100% of the Tencent proceeds are going towards the buyback, right? I think your questions were related to…
Richard Eary
Can I just be clear on that? So you’re saying that you will sell down Tencent stock to buy — to fund 100% of the buyback, you won’t use any liquidity sitting on the balance sheet today to fund the buyback, all the buyback will be funded by Tencent?
Basil Sgourdos
That is correct. That is correct. So I just wanted to clarify, that’s correct. And what we do is we preserve the balance sheet to fund our operations and have some flexibility. And it also — the level of liquidity we have on the balance sheet also helps us with support towards our investment-grade rating.
Then on the second one, the reason why we want to buy at the respective pre-float so that both sets of free floats benefit from this buyback. It’s not driven by anything else other than that, right? And then what the tax implications are different percentages that can be a very, very long conversation, and it does vary, right, depending on who owns what, but it’s not what drives that. What drives it is really just wanting to allow both sets of shareholders to benefit.
Richard Eary
Okay. Can I ask two follow-up quick questions? The one is in terms of the sensitivity that you gave in the deck, I know you think still be asked a question between $10 billion and $30 billion. What was the rationale for those ranges that you put in there?
Basil Sgourdos
There are multiples of tens, Richard. Okay, just going up, and we just want to assume how the percentages change, right, over time. So there’s — I don’t read each to it, but Bob and Ervin also explained earlier, right, that we have bought shares at a 40% discount.
Richard Eary
And maybe just a last question regarding the Remco report. Obviously, it’s nice to see the LTI is now linked to the discount reduction. But from reading that Remco report, it just has discount reduction. There’s no basically emphasis in terms of the reduction to what or by a cent amount, can you elaborate in terms of what that will be and how that will get voted on?
Bob van Dijk
Yes. So what I can say is that you should probably have a good look at the disclosures for the year that was. And then I think going forward, the Remco will evaluate whether the discount reduction is up to a standard that would warrant any payment at all. So, that is — they’re allowing themselves a certain level of discretion, but they also you could imagine that the discount reduces for the wrong reasons is that something you want to want to incentivize.
So the Remco will make an assessment of that after the end of the year and then evaluate whether the outcome is positive and whether the positive outcome is as a result of the right management actions. And then it will have to defend that to the shareholders — that choice of the shareholders.
Operator
So ladies and gentlemen, in the interest of time, that is all the time we have for questions. Sir, if you would like to make some closing comments.
Bob van Dijk
Yes. Closing comments is thanks, everybody, for listening. Sorry, we went a bit over time, but with many good questions. And I appreciate your time and interest, and I hope to see you all very soon.
Operator
Thank you very much then. Ladies and gentlemen, that then concludes today’s conference, and you may now disconnect.
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