PragmaGO enters the Romanian market by acquiring 89% of Romanian Telecredit

PragmaGO, one of Europe's leading non-bank providers of SME finance in CEE, known for its innovative technological solutions developed by an internal software house (PragmaGO.tech), has 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. PragmaGO provides financing to SMEs in the form of factoring and loans, mainly through embedded finance (BNPL and Merchant Cash Advance) - unique services that are directly integrated into the ecosystem of partners (e.g. marketplaces). 

Embedded finance is characterized by scalability and an automated risk management system. For example, Merchant Cash Advance allows an individual merchant's pre-financing limit to be estimated based on—among other things—sales in the partner's environment. Repayment can be made in installments, as a percentage of turnover. 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, and the company had 17,000 active clients (+25% y/y) in Poland. The company has grown by a factor of three in the last three years. At the end of the year's first half, PragmaGO's turnover was PLN 1.15 billion, an increase of 25% year-on-year. 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.

Omnicredit provides non-bank financing to SMEs and has been growing dynamically for several years. 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 last year. Its receivables portfolio has grown to EUR 8.2 million throughout 2024.

Reconstruction Capital II Limited (“RC2”) is a closed-end investment company with two 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. Apart from an 85% shareholding in Telecredit S.A., RC2 also owns two other companies.

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, scale the business

– said Vjačeslav Lypko, Director of International Expansion of PragmaGO.

We will focus heavily on embedded finance, which allows us to achieve economies of scale, including geographical scalability. In digital factoring, we will implement innovative processes that have already been proven to us in the Romanian market. 

- added Jacek Obrocki, Vice President of PragmaGO.

When RC2, as majority shareholder, re-launched Telecredit as a factoring and micro-lending 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 nonperforming loan (NPL) management business, 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

- comments Ion Florescu, President of the Board of New Europe Capital Srl, the investment adviser to RC2.

Telecredit has been supporting Romanian SMEs and entrepreneurs since it launched its ‘Omnicredit’ SME financing platform in early 2019, having provided EUR 145 million of financings either in factoring transactions or micro-loans since then. The management team is proud to have grown the business despite a difficult period for Romania and the region, including the Covid-pandemic-induced lockdowns and the war in Ukraine. We look forward to a new chapter in the company’s development once the transaction with PragmaGO is completed, and are confident that our new shareholders have all the resources and know-how to continue Telecredit’s exceptional growth trajectory

- concluds Elisa Rusu, CEO of Telecredit.