June 28, 2024 (MLN): Since TRG had garnered substantial attention in the news and was the subject of persistent rumours that impacted its share price, the investors were on edge, eagerly awaiting TRG's corporate briefing for clarity that was held yesterday.

Rumors regarding Afiniti’s debt were making rounds on social media and thus it remained the major concern and question of every participant throughout yesterday’s corporate briefing.

In response to the queries regarding Afiniti’s debt rescheduling plan, the management expressed that Afiniti is not a public company, hence its information cannot be disclosed publicly. However, Afiniti will soon announce its debt rescheduling plan.

The management cautioned investors not to pay attention to rumours while making investment decisions.

The management further disclosed that Afiniti carries a Debt load of over $500m, excessive for current business, especially given the decline in industry valuations.

For this the company is engaged in recapitalization discussions with lenders to reduce interest expense and extend maturities, the management informed.

In response to another query, the management of the company has indicated that a 10% change in the traded price of the company's stock on the PSX, given that the company indirectly holds 155.76 million shares (representing 28.5% of the total outstanding capital) through Greentree Holdings Limited, could result in an impact of Rs1.5 on EPS.

On the share of loss in equity accounted value, the management responded that 15% of the Rs19.45 billion for the nine months ended March 2024 is attributable to the reduction in the market value of the Company’s shares held via Greentree Holdings Limited.

The management attributed this to the drop in the share price of TRG Pakistan itself.

By the way, this is somewhat contrasting to the benefit logic that was the management’s reason to purchase TRG Pakistan's shares, amounting to an indirect leveraging effect on the accounting income of the Company. 

Addressing another query about the significant rise in administrative costs, the management explained that TRG Pakistan now bears all its expenses independently from TRGI. This change has led to notable increases in expenses, primarily driven by staff salaries and litigation costs (majorly brought by the former CEO).

Participants were also keen to know why the $30m cash has not been repatriated.

The management clarified that funds held by Greentree Holdings Limited are not being repatriated and distributed to shareholders as dividends due to their utilization in several strategic areas.

The company is holding $30m cash in the USA via Greentree Holdings Limited which is borrowed by TRG International.

The reason for borrowing is to pay the expenses of TRG Pakistan and also to pay for the litigation expenses in the United States, invested in interest-bearing instruments, and are kept on hand to address ongoing court cases that negatively impact share prices.

It was also shared that the management of TRG International is to find the most efficient way to get this cashback to shareholders in due course unless there is another investment opportunity that brings more value for the shareholders.

The management also shared that due to the 15% corporate tax and 15% dividend tax, there was an inherent inefficiency about a cash dividend but that a dividend could not be ruled out in future.

In response to another query, the management explained that the discrepancy between TRG Pakistan's economic shareholding of 68.8% in TRG International Limited and its lower voting power of 45.3% resulted from a technical redemption by other shareholders and subsequent complex negotiations.

In 2022, certain shareholders chose to redeem their holdings, leading to an increase in TRG Pakistan's economic shareholding from 45.3%.

It is interesting to note that by the standard of economic shareholding, TRG International is a subsidiary of TRG Pakistan Limited. This implies that via Greentree Holdings Limited, TRG International Limited also owns shares in its parent company through a complex structure which has already been challenged by various shareholders.

At present, its voting power decreased from 45.9% to 45.3%, a reversal of the typical relationship between economic interest and voting rights.

Concerning the company's potential purchase of its shares from the open market (PSX), the management clarified that TRG Pakistan does not buy its shares through this avenue.

Instead, the responsibility for managing assets, which includes possibly enhancing shareholder liquidity and value through the purchase of TRG Pakistan shares, lies with TRG International.

This decision-making authority rests with the independent Board of a wholly owned subsidiary of TRG International known as Greentree Holdings Limited.

It was further explained that Greentree Holdings Limited, having already acquired approximately 28.54% of TRG Pakistan shares, may have refrained from further purchases.

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Posted on: 2024-06-28T15:03:42+05:00