IBEX Repurchases Shares Worth US$70 Million from TRG

Staff Report
TRG Pakistan (TRG) has announced that its associate, The Resource Group International (TRGI), has entered into a definitive agreement with IBEX Limited (Nasdaq: IBEX). As part of the agreement, IBEX repurchased approximately 3.56 million shares from TRGI, representing 20% of the company’s stake.

Previously, TRGI held a 30% stake in IBEX, and following the transaction, TRGI’s stake will decrease to 12.5%, adjusted for the cancellation of the 3.56 million shares. Additionally, IBEX has the option to repurchase this remaining stake within the next four years, subject to certain conditions.PM Shehbaz Sharif Pushes for US Investment in Pakistan at UN Assembly

The transaction was executed at US$19.65 per share, based on the five-day volume-weighted average trading price for IBEX on Nasdaq. This results in proceeds of US$70 million, of which US$45 million will be paid in cash to TRGI, and the remaining US$25 million will be financed by the seller. The terms of the seller financing are yet to be disclosed.

The deal values IBEX at a trailing twelve-month (TTM) P/E ratio of 10.5x. Based on EBITDA (US$66 million as disclosed in an analyst briefing), the multiple is 5.3x. In its June 2024 briefing, TRG noted that the average sector P/E for IBEX is around 5-9x.

TRG also mentioned in the last analyst briefing that IBEX had a cash balance of US$50 million and no debt. It is believed that this cash was used for the share repurchase from TRGI.

Impact on TRG Pakistan (TRG):
TRG owns 68.8% of the total shares in TRGI, representing 45.3% of the voting power. Based on this, TRG’s stake in the IBEX divestment transaction would be approximately US$48 million (US$31 million in cash and US$17.2 million in seller financing). This is expected to result in a per-share impact of Rs16-24 (Rs16 in cash and an additional Rs9 in seller financing) before tax for TRG Pakistan.

Channel checks indicate that the seller financing is also on an arms-length basis, with further details to be disclosed by IBEX to NASDAQ in due course.

The deployment of these proceeds by TRGI has not yet been disclosed. However, it is expected that the funds could be used to buy more TRG shares, pay dividends, or reinvest in other ventures. TRGI previously used proceeds from the e-Telequote divestment to retire debt and purchase TRG shares through Greentree, a wholly owned subsidiary. Further details regarding the capital deployment plan are awaited from the management.