Karachi October 4 2022: TRG Pakistan portfolio company, Artificial Intelligence Enterprise Software was able to retain, consolidate and slightly grow its revenue during the fiscal year 2022 and turn around the business from a significant negative EBITDA in 1H FY22 to positive EBITDA in 2H FY22, according to information shared by the company.
“This year is a year of consolidation for our Company. TRG Pakistan associate, The Resource Group International Limited (TRGIL), successfully closed the sale of e-TeleQuote business in July 2021” says newly elected Company’s Chairman Mohammedulla Khan Khaishgi.
He added, “The Company’s share of TRGIL’s assets, both liquid and non-liquid, stood at Rs.56.7 billion as of June 30, 2022. The total amount invested in TRGIL by the Company was Rs 3.6 billion, which makes this an extremely profitable ventures. We expect the value of the Company’s investment in TRGIL to continue to grow in the future.”
Artificial Intelligence Enterprise Software (AI Software Company) has had historical revenue growth averaging over 50% during the last decade. However, in recent years, this growth has been lumpy with flat revenue during FY19 and FY20 followed by revenue growth of nearly 300% during FY21. In light of recent events, the plan for FY22 was to consolidate the FY21 growth and target additional enterprise deals which would result in further growth in FY23. Despite the events of November 2021 that led to the departure of the former CEO, the AI Software Company was able to retain, consolidate and slightly grow its revenue during FY22 and turn around the business from a significant negative EBITDA in 1H FY22 to positive EBITDA in 2H FY22. The AI Software Company expects resumption of healthy revenue growth in FY23 and beyond with continued margin enhancement.
TRG Pakistan Portfolio Company Ibex Limited (IBEX) continued to show strong performance and healthy growth. IBEX has been successful in transforming its business over the last six years, with a shift towards high-growth, emerging technology, and new economy sectors, resulting in increased client diversification and higher growth from new brands that has more than offset the decline from mature, legacy clients. IBEX’s stock price on NASDAQ posted a strong recovery from end of 1H FY22 to end of FY22 despite the significant decline in NASDAQ Composite Index during the same time.
The most significant item on our balance sheet is the value of the Company’s share in TRGIL, our sole operating asset. As of June 30, 2022, the value of our share in TRGIL is Rupees 56.7 billion, representing an increase of Rupees 7.1 billion compared to Rupees 49.6 billion on June 30, 2021. This increase is due to a strengthening of the US Dollar compared to the Pak Rupee, as TRGIL incurred a net loss during the financial year due to reasons explained in the ensuing paragraph. In addition to the Company’s stake in TRGIL, it also has other assets of Rupees 0.04 billion and liabilities of Rupees 9.2 billion (primarily relating to deferred taxes) resulting in net assets of Rupees 47.5 billion.
“Our income statement is primarily driven by the changes in value of our share in TRGIL. Our share of the net loss in equity accounted investee (i.e. TRGIL) was Rupees 5.9 billion, before taxation” says Company Chief Financial Officer Rahat Lateef.
He added, “This loss was primarily on account of the redemption of certain preference shares in December 2021. These preference shares were originally classified as debt owed to their holders at the amount of their original investment, as the investors had the ability to have their preference shares purchased back at the higher of the original issue price or their pro-rated share of the underlying net assets, including their share of a preference amount.”
He further states that, “As the redemption value of these preference shares was more than the original issue price because of the high value of the underlying monetization, the difference between the redemption amount and the original issue price was reflected as a one-time non-cash charge.”
In addition, there was also a mark-to-market loss booked on IBEX shares held by TRGIL as IBEX’s share price on NASDAQ declined by almost 14% during the year under review. This was, however, offset by a gain resulting from the revaluation of our stake in the AI Software Company.
The Company recognized interest income of Rupees 8.5 million in its income statement, whereas it incurred expenses of Rupees 46.4 million and recognized other income of Rupees 23.1 million. Tax amounting to Rupees 902.4 million was reversed during the year. Overall, the Company posted net loss of Rupees 5 billion for the year ended June 30, 2022.