TRG PAKISTAN REPORTS RS30.8 BILLION LOSS

TRG Pakistan Limited has announced its financial results for the fiscal year ending June 30, 2024, reporting a significant loss after tax of Rs30.8 billion, equivalent to Rs56 per share. The company attributed this loss primarily to a substantial decrease in the book value of its holding in affiliate TRG International, which fell from Rs78.1 billion in June 2023 to Rs40.5 billion in June 2024.

Analysts have pointed out that TRG Pakistan, as an investment holding company, experiences considerable volatility in its financial results due to its exposure to publicly traded securities, which are marked to market. One such security, IBEX Limited—a NASDAQ-listed portfolio company—saw a 24% drop in its share price during the fiscal year, from US$21.23 to US$16.18. However, the stock has since recovered to US$20, indicating a potential upside.

In addition to IBEX, TRG Pakistan holds an indirect stake in privately-held Afiniti Ltd., which has undergone a comprehensive debt restructuring. The value of Afiniti has been significantly written down as part of this process. Since the restructuring is taking place through a court-managed process, analysts believe that the full impact on TRG Pakistan’s holdings will only become clear once the restructuring is finalized, likely by the end of 2024. Despite this, TRG Pakistan has stated that it expects to “substantially retain” its diluted shareholding in Afiniti, indicating potential for future upside.

As of June 30, 2024, the book value of TRG Pakistan’s equity stands at Rs33.3 billion, or Rs61 per share. However, the company’s shares were trading at Rs46.1 mid-morning, reflecting a 24% discount to its book value. Brokerage firm Topline Securities noted that the financial results were in line with expectations for the fourth quarter of FY24, with a loss of Rs14.1 billion largely driven by valuation losses on indirect assets held through TRG International.

TRG PAKISTAN

TRG Pakistan announced on Friday, September 20, 2024 that its affiliate, The Resource Group International (TRGI), along with Afiniti, its portfolio company based in Washington, D.C., has finalized a comprehensive restructuring plan aimed at improving Afiniti’s financial health and growth potential in the AI technology sector.

The restructuring plan entails a significant reduction in Afiniti’s current senior debt and a multi-year extension of its debt maturity. This initiative is expected to lower cash interest expenses and facilitate the recapitalization of Afiniti’s balance sheet. The notice, shared with the Pakistan Stock Exchange (PSX), indicated that this restructuring will enhance the indirect economic stake of TRG Pakistan in Afiniti, which will be “substantially retained” in percentage terms on a fully diluted basis.

Further details regarding the restructuring transaction will be released upon its completion, which is subject to court approval in Bermuda and the U.S. and is anticipated to finalize before the end of the year.

Market reaction to the announcement was initially positive, with TRG Pakistan’s share price rising to a high of Rs56.75 shortly after trading commenced, up from Rs55.30. However, by the mid-session break, the share price had dipped to around Rs54.55.

The announcement comes as a relief to investors, resolving some of the uncertainty surrounding Afiniti’s debt restructuring, which has burdened TRG Pakistan for over a year due to the substantial debt load that Afiniti accumulated in its previous expansion efforts. Analysts have noted that navigating debt restructuring involves complex negotiations that must balance the interests of various stakeholders while safeguarding the business’s value.

By addressing the unsustainable leverage, the restructuring is expected to create a more sustainable growth platform for Afiniti, allowing it to move forward without the pressure of high-interest payments.

LAST YEAR SHENANIGANS

TRG Pakistan Limited issued a statement last year in October, 2023 reaffirming its commitment to safeguarding its stakeholders and preventing its former CEO, Zia Chishti, from unlawfully taking control of the company. The notice was released to the Pakistan Stock Exchange (PSX) amidst ongoing media campaigns that TRG alleges are malicious and defamatory, stemming from Chishti’s attempts to discredit the current management.

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In the notice, TRG Pakistan condemned the “malicious media campaign” against the company, which has involved misleading claims made by Chishti in paid advertisements. The company pointed out that many of these articles appear to be identical, suggesting a coordinated effort to undermine its reputation and management.

TRG emphasized that this campaign is part of a broader strategy by Chishti and his associates to influence the company and gain control, actions that TRG believes could harm the value of its assets. The company urged its stakeholders to rely solely on official communications and not be swayed by the ongoing smear campaign.

This statement follows reports that have raised concerns about the company’s performance, including a nearly 20% decline in share price since the beginning of the year, despite the KSE-100 index gaining around 19%. However, it was also noted that TRG reported a reduced loss after tax, decreasing from Rs4.98 billion in FY22 to Rs1.34 billion in FY23.

The situation has escalated into a legal battle and a struggle for control within TRG Pakistan. The turmoil began in November 2021, when Zia Chishti faced allegations of sexual assault in a US congressional hearing, which triggered significant fallout for both him and the companies he was associated with, including Afiniti Ltd. Following these allegations, Chishti resigned from his positions at Afiniti and TRG Pakistan.

In light of these events, TRG Pakistan’s management has been vigilant in combating potential hostile takeover attempts and preserving the integrity and value of the company amid these ongoing challenges.