Polish PragmaGO, a leading non-bank provider of SME finance in CEE, started its international expansion from the Romanian market through the acquisition of an 89% shareholding in Telecredit IFN SA (operating under the brand name Omnicredit) from investment company Reconstruction Capital II Limited (RC2) and Elisa Rusu, Telecredit's CEO, for an initial consideration of EUR 5.785 million plus an earn-out of up to EUR 0.445 million.

The deal is subject to Romanian foreign direct investment authority approval, RC2 shareholder approval, and several other conditions precedent, the company said.

Romania, which shows significant growth potential in the SME financing sector, is the first step of PragmaGO's international expansion. Over the next three years, the company plans to enter several markets in Eastern and Western Europe.

"We see Omnicredit as a strong and trustworthy experienced strategic partner, and together, we will continue supporting the development of a wider group of Romanian SMEs. The company has a similar target customer profile to ours, focuses on digitalization and automation of its business processes, and has strong operational and credit risk expertise. Together with Omnicredit, we are well positioned to rapidly expand the portfolio and grow our customer base and scale the business," said Vjačeslav Lypko, Director of International Expansion of PragmaGO. 

Ion Florescu, President of the Board of New Europe Capital Srl, the investment adviser to RC2, commented: "When RC2 as majority shareholder re-launched Telecredit as a factoring and microlending business in early 2019, its shareholder funds amounted to a mere EUR 1.05 million. Since then, Telecredit has been involved in approximately EUR 145 million of financing transactions, providing financial support to hundreds of Romanian entrepreneurs and SMEs."

"Excluding the earn out component, the sale of Telecredit, if approved by RC2's shareholders, will represent a 6.2 times return on capital since the factoring business was started, and a return of 6.7 times if one includes the full earn-out component. If completed, the sale of Telecredit will represent another successful exit of RC2 and its second successful exit from a financial services business, the first being the sale of the Top Factoring group, a non-performing loan (NPL) management business, in 2017, which returned EUR 19.8 million to RC2 (including dividends received over the course of the investment), or approximately 5.7 times the cost of this investment," he added.

PragmaGO provides financing to SMEs in the form of factoring and loans, mainly through embedded finance (BNPL and Merchant Cash Advance). The main European competitors in this field are Youlend, Liberis, Billie, iwoca, Mollie, and Wayflyer.

In 2023, PragmaGO's portfolio value exceeded EUR 70 million, with 17,000 (+25% y/y) active clients in Poland. At the end of the first half of the year, PragmaGO's turnover was PLN 1.15 billion, an increase of 25% year-on-year.

Specializing in digital factoring, Omnicredit's receivables portfolio amounted to EUR 6.4 million at the end of 2023 (+54% y/y). The dynamic growth is followed by profitability - with a turnover of EUR 40 million (+40% y/y). In the first half of this year, Omnicredit has already achieved a turnover of EUR 28.5 million, representing growth of up to 90% compared to the same period last year. Its receivables portfolio has grown to EUR 8.2 million over the course of 2024. 

Reconstruction Capital II Limited ("RC2") is a closed-end investment company which, apart from an 85% shareholding in Telecredit S.A., has two other main investments: Policolor S.A., a leading producer of paints and chemicals with manufacturing plants in Romania and Bulgaria, and Mamaia Resort Hotels SRL, a 300-room hotel in Mamaia, Romania's premium Black Sea resort.

irina.marica@romania-insider.com

(Photo source: the company)