July 02, 2023 (MLN): Just like any other corporate briefing session, the shareholders of TRG Pakistan eagerly anticipated the corporate briefing session, held on June 27, 2023, hoping for transparency and answers to the important questions.

However, their confidence was shattered as the Management skillfully evaded crucial inquiries, leaving a dark cloud of uncertainty hanging over the Company’s future.

The once-promising event turned into a disappointing spectacle, parting shareholders longing for truth and doubting what secrets lie hidden behind the corporate walls of TRG Pakistan.

Unanswered Key Questions:

The company avoided holding its Corporate Briefing Session in an interactive format and opted only to respond to selected questions written by the participants.

Several key questions, including a question by the company’s Founder and former CEO Mr. Zia Chishti, were not answered by the Management. Mr. Chishti simply asked a rather innocuous question “Please provide a litigation update.” which the Management conveniently avoided and labeled as “This question has been answered live”.

The same was the fate of several such questions that pertained to the potential conflict of interest regarding the voting powers and distributions entitlement of the shares held by Greentree Holdings Limited, the status of ownership of IBEX shares that represent a significant part of the company’s liquid assets, fate of cash being held without any declared purpose by Greentree Holdings Limited, and the underlying performance of company’s liquid funds excluding the generic gain from the devaluation of local currency.

Additionally, a court order has restrained the company from conducting its Annual General Meeting (AGM), further fueling uncertainty about the company’s financial affairs.

AGM Restraint Dilemma:

Furthermore, the briefing failed to address the restraining order imposed by the Sindh High Court, preventing TRGP from conducting its Annual General Meeting (AGM). Ironically, the company’s own shareholders are unaware as to why the Honorable High Court of Sindh has prevented the company from holding its Annual General Meeting.

The restraint order is linked to a suit filed by the company against multiple parties including Mr. Zia Chishti and JS Group. 

The AGM’s postponement not only left shareholders in the dark but also posited a risk of TRGP being listed under the Defaulter’s Segment if the Meeting was not held within the specified timeframe.

In response to a question regarding the steps the Management is taking to resolve the issue of not holding the AGM, the management stated, “The matter is pending due to a Stay Order, and the company is awaiting the green light from the court to hold the AGM.”

They further added, “We are bound to abide by the orders of the Honorable High Court. For the time being, we are constrained, and we would like to remove this constraint. Therefore, the management is working in the background.”

SECP Complains Deepens TRGP Intrigue:

Intrigue loomed over TRGP as the company has filed a lawsuit against its own Directors and there are certain complaints of SECP against the company concerning the perusal of funds associated with Greentree Holdings Limited.

The company has also received Stay Orders against Show Cause Notices issued by SECP on matters associated with Greentree Holdings Limited’s purchase of its own shares.  The company has accused SECP of biased behavior stating that the matter is at the behest of parties working against the interest of the Company.

The contentious nature of these cases further exacerbated the uncertain climate surrounding the company.

While answering the questions pertaining to the number of shares of TRG Pakistan that have been acquired by Greentree Holdings Limited up till now, the management stated that there have been 156 million shares acquired, and they are being held for the economic benefit of the company’s shareholders.

“As we monetize all the liquid assets, the economic benefits of each of these shares will transfer to the shareholders. All the benefits of the shares held by Greentree will be transferred to TRG Pakistan and its shareholders,” it added.

“This will happen in due course based on when we are able to create liquidity and monetization in our overall asset portfolio. Rest assured; these shares are safeguarded for the benefit of TRG Pakistan’s shareholders.”

It is important to note that the company has not yet declared the status of these shares, including their voting rights and dividend entitlements. However, it has been confirmed that they have voting rights.

However, since these shares have been bought by TRGP’s own funds, it is unclear if the Management would also use these voting rights in matters including Approval of Accounts, Directors’ Elections, and other matters where conflict of interest may arise between the management and the shareholders.

Shareholders of the company are also not clear as to if the company was in a monetization mode, then why already liquid funds were further invested in its own shares against potential legal and reputational challenges. 

Moreover, the management conveniently ignored the queries related to IBEX wherein it was asked that IBEX shares were to be transferred to Greentree Holdings Limited, from TRG International Limited. Has the Company been compliant with this original announcement?

With regards to the total quantum of funds allocated to Greentree Holdings Limited on TRG Pakistan’s behalf, the management informed that the company had released Rs10mn deferred cash which was not received and fluctuated over time.

In the end, the company received approximately $118mn. Those funds have been used for two things: 1. Purchase of shares and 2. Ongoing operating expenses of TRG Pakistan. Other than that, $33mn funds are being left, it said.

Like the majority of the questions, the management also chose not to answer the question wherein it was asked about the underlying performance of Greentree Holdings Limited, excluding any devaluation gain and if there is any discernible and proactive performance benchmark for Greentree Holdings Limited, which is controlling and managing significant resources of TRG Pakistan shareholders.

Question Prioritization Bias:

The management took more time to elaborate on softer issues of its business model than to explain these fundamental questions to the shareholders.

The briefing commenced with TRGP highlighting its strategic investments, including a 17% stake in Afiniti and a 30% stake in Ibex Limited, through its associate TRG International (TRGIL).

Additionally, TRGP revealed the existence of an SPV called Greentree, which held a substantial amount of TRGP shares, representing a 28.6% stake in the company.

Afiniti, an enterprise software company, emerged as a significant player in TRGP’s portfolio. Despite boasting impressive financials, with the last twelve-month revenue of $270 million and adjusted EBITDA of $60 million, Afiniti struggled with a substantial net debt of $500 million. This debt had been utilized for research and development purposes.

To counterbalance this burden, Afiniti launched two new products named Airo and Mega, aimed at expanding its client base and improving call center operations.

Meanwhile, Ibex Limited, in which TRGP held a stake, was projected to achieve a record-high adjusted EBITDA of $89 million for the fiscal year 2023. With a strong operational presence spanning 34 locations and employing over 31,000 individuals, Ibex boasted a track record of steady revenue growth over the past decade.

Despite these promising prospects, critical questions raised during the briefing remained unanswered, casting a shadow of doubt over TRGP’s future.

Shareholders expressed concerns regarding the utilization of funds, particularly those invested in Greentree Holdings Limited. The lack of transparency surrounding Greentree’s management of TRGP’s liquid assets and its ownership of Ibex shares raised potential conflicts of interest.

The Corporate Briefing Session, which was supposed to provide clarity and reassurance to shareholders, instead left them questioning the integrity and future of TRG Pakistan Limited.

TRG performance versus KSE-100 Index performance:

TRG Pakistan has continuously underperformed in the KSE 100 index, with only one or two exceptions throughout the years.

In spite of occasional moments of relative success, the company’s overall performance has been constantly lagging behind the broader market benchmark.

Copyright Mettis Link News 

Posted on: 2023-07-02T17:43:48+05:00