eBusiness Weekly
Nelson Gahadza
ECOCASH Holdings says only 22 percent of debenture holders exercised the option for early redemption as the fintech company sought to mitigate against exchange risk for the debentures which mature in April 2023.
The group in its financials for the year ended February 28, 2022, said the $3,3 billion of the related party payables relate to debentures balances which were assumed pursuant to the demerger of the
Group from Econet Wireless Zimbabwe Limited on November 1, 2018.
The group said its 50 percent share of the 904 778 710 (2021: 1 166 906 618) unsecured redeemable debentures with an annual compounding coupon rate of 5 percent were issued at a subscription price of 4,665 US cents per debenture and these are accounted for as a long-term related party payable.
“The obligation is denominated in United States dollar and as such subject to exchange rate revaluation. Given the impact of the exchange rate fluctuations on the business performance, during the current financial year, a call was made to debenture holders for early redemption and 22 percent of debenture holders exercised the option,” the group said.
The Group said significant exchange rate movements have been experienced in the economy during the reporting period under review, but will continue to implement measures to mitigate against exchange risk and strengthen performance. As at February 28, 2022 the Group recorded exchange losses amounting to $1,2 billion compared to $6,3 billion in 2021.
In 2020, Econet Wireless Zimbabwe offered, on a voluntary basis, an early redemption of the capital and accrued interest on debentures issued in March 2017, at the time of the Rights Offer. The debentures stem from a US$128 million capital raise exercise in 2017, about half of which were debentures, as the company sought to mobilise the foreign currency needed to settle external loans.
Between 2012 and 2014, Econet had obtained external loans amounting to about US$460 million to finance network expansion and meet obligations from earlier debts, which were due.
Econet Global Limited, who were the guarantors of the foreign debt, which amounted to US$128,19 million, were the underwriters of the transaction. Creditors that were meant to be paid from the proceeds of the rights issue and debenture instrument included Ericsson, Industrial Development Corporation (IDC) of South Africa, African Export-Import Bank and China Development Bank.
Meanwhile, despite the challenges prevalent in the operating environment, Ecocash Holdings registered positive growth in revenue and profit margins. Revenue was up 26 percent to $29,9 billion compared to prior year’s $23,7 billion, while EBITDA margin improved from 15 percent to 18 percent during the period under review.
Sherree Shereni, the group’s chairperson in a commentary of the financials, said the Fintech businesses remained the largest contributor to revenue, at 80 percent from 77 percent in 2021.
She noted that the contribution by the Insurtech business was at 14 percent, a slight decrease from the prior year’s 15 percent, and Vaya Technologies closed the year at a contribution of 6 percent.
“Management will continue to adapt business units’ operating models to both grow and diversify sources of revenue,” she said.
Shereni noted that the Group’s EBITDA margin improvement from 15 percent to 18 percent was a result of the relentless focus on cost optimisation.
“The Group will remain focused on revenue growth, operational efficiencies, and optimisation of the balance sheet. During the year, 22 percent of the debenture holders exercised their option to redeem their debentures early in line with our balance sheet optimisation strategy,” she said.
She highlighted that foreign currency exchange losses reduced from $6,3 billion in 2021 to $1,2 billion during the current year.
In terms of operations, Shereni said that product innovation remained a key priority and has allowed the group to provide relevant digital solutions that address consumer needs.
She said with the continued support of stakeholders, the Group launched several exciting products and solutions that include the automation of merchant settlements, self-care portal for EcoCash reset pin-reset, MARS laboratory tests for Covid-19, Vaya Services Fuel Monitoring, Vaya Smart Security, and improved KaShagi digital loans.
“To drive our digital banking model, Steward Bank successfully deployed a new core banking system with enhanced features.
“Leveraging on the upgrade, our Square banking App was also upgraded as well as the online banking offer,” she said.
Shereni also indicated that the Bank also complied with the minimum capital requirement set by the regulator within the set timeline of 31 December 2021.
She said that due to the group’s drive towards a superior customer experience and service culture it invested continuously in products and services designed to bring convenience, especially during the Covid-19 lockdowns and restrictions.
FBC Securities in its earnings flash review of Ecocash Holdings said while the mobile money unit remains the Group’s highest revenue earner, the highly regulated nature of the business may be a limiting factor to the unit’s revenue generating capacity.
“We believe management’s ability to grow its other revenue streams will be a key consideration in the business’ continued success,” it said.
The equities research and investment company said the business remains a well-diversified leader in FinTech solutions and has highlighted continuous plans to produce cutting-edge inclusive solutions.
It said the business plans to expand FinTech solutions to agriculture, education, healthcare, and financial services, key sectors in the local economy, through the adoption of artificial intelligence (AI), big data, blockchain, and machine learning.
“We believe the Group is well positioned for growth going forward in line with international FinTech trends,” said FBC Securities.
