TRG may consider IPO to monetize Afiniti

March 02, 2022 (MLN): The monetization of Afiniti, a portfolio company of The Resource Group (TRG) may take place in 2023 or 2024 and TRG would consider all options including private placements and public listing, the management of TRG Pakistan informed while holding a corporate briefing session recently.

The agenda of the recently formed SPV was to find a way to return value to TRG shareholders either in the form of a share purchase of TRG or investment in Afiniti if needed, Umair Naseer, Analyst at Topline Securities said.

It is prudent to note that a special independent board of directors has been formed by TRG International (TRGIL) for running the SPV and for transferring value to TRG Pakistan shareholders in the most efficient way.

Last day, TRG Pakistan had announced its financial results wherein the company has suffered a net loss of Rs12.6 billion (LPS: Rs23.06) against the net profit of Rs4.4bn (EPS: Rs8.11), mainly due to loss of Rs16.4bn from equity accounted investee.

While discussing the financial health of the company, the management noted that this loss on associates was due to the Rs6.8bn mark to market losses booked on IBEX shares held by TRGIL due to a reduction in its share price, and loss on certain preference shares redemption by certain TRGIL shareholders.

TRG value mainly depends on Afiniti value and IBEX.

As per the management, the revenues of Afiniti in 1HFY22 grew slightly when compared with revenues of the same period last fiscal year. During 2HFY22, the company witnessed a notable increase in its cost structure to prepare for future growth, resulting in a decline in adjusted EBITDA.

Moving forward, the management aims to rationalize the cost base while revenue growth is expected to return from FY23.

The revenue of IBEX Limited, during 1HFY22, stood at $241mn against $226mn in the same period last year. The adjusted EBITDA and Net Income during this period were $29.3 million and $11.5 million compared to $33.7 million and $(0.9) million, respectively, for the same period last year.

Speaking of its future growth, the management said that the portfolio company of TRG has been investing in additional capacities to cater to increased demand for its services. IBEX has concentrated on high growth, emerging technology, and new economy sectors which are expected to result in increased client diversification and higher growth from new brands which may offset the decline from mature clients, a research note by Topline highlighted.

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