Vef AB (publ)

STO:VEFAB

Earnings Call Transcript 2022-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the VEF Q2 results conference call. [Operator Instructions] I would now like to hand the conference over to your speaker today, David Nangle, CEO. Please go ahead.

[David Nangle, executive]

Thank you, operator, and Good morning, good afternoon, everybody, and welcome to our Q2 results conference call. For a change, with me today, I've got our CIO, joining me on the call, Alexis Koumoudos. Many of you know him, but an introduction to you all from his side as he will be taking part in this call me today and also part of the Q&A at the end. Going straight into the slide deck into Slide #2, just to summarize the key events of the quarter. And I think first and foremost, we kind of [indiscernible] on the year-to-date performance in the markets. It's been tough, and that's probably a statement that you're hearing on many conference calls at the moment from a variety of CEOs in a variety of sectors. For us, it's really about inflation and interest rates rising, especially in the U.S. and have set the tone for financial markets and stock markets in particular, of which a lot of what we do is linked. And the trend that started in Q1 accelerated into Q2. And then the space that we invest in, obviously, the private space, but even in the listed space, the fintech area and tech area in general is higher beta has been hit more than most, but the full brunt were basically felt in our parts of the world. And our share price within that as a parameter of that, you could say, has not been immune and was up 48% quarter-on-quarter. So quite a tough quarter all around from a macro and a micro perspective into our share price. And what we've done in this quarter, in summary, is we have reduced our NAV to try and reflect these new market conditions. And that movement is 40% lower quarter-on-quarter. So quite a big move and indicative of a move that we did back in Q1 '20 with the onset of COVID or first half 2020, the onset of COVID. There are windows like this, which need more dramatic not moves either north or south and given the backdrop of the market that we operate in. None of this has any reflection on the quality of our portfolio or companies. It's effectively a move in valuation point as reflected by the moves in peer group multiples across the broader markets. That said, we're confident, we're calm, we're actually optimistic. And why so? Because on a portfolio level, it is well positioned, our end. And specifically, we focus on the top end of the portfolio, over 70% of our equity or invested portfolio, which is Creditas, Konfio and Juspay. And all these 3 companies are well funded with high-growth plans and our path to breakeven. And that obviously gives us a lot of comfort around the debate through the debate on valuation as always in these markets, but we're not debating the viability, the growth rates or the fundamental attractiveness of what are our top assets. And beyond that, we have a bunch of names below those top 3 and which are well funded and showing exceptional growth. We're going to point to names in India, which is a very fast growth market for us and an improving size-wise market in our NAV, where names like Rupeek and Blackbuck, after -- just to name in our top 3. Recent investments in Brazil, like Solfacil and Gringo, and our names across the portfolio in different areas and geographies like TransferGo and Abhi to name about few and which are all growing well, well funded and in a very strong place, irrespective of the macro micro backdrop that we play into. And also a number of our companies received follow-on funding in the recent quarter at previous round valuation, which is indicative of their quality, namely Creditas, which we'll talk about in detail, but also Juspay, Solfacil and Rupeek. And then at a VEF level, that depends on attack in windows like this, but defensively, we're well set up. We've got $64 million of cash on our balance sheet as of the end of the quarter and a net positive cash position minus debt. So we feel very strong and comfortable in the current environment, albeit as harsh as the current environment is that we see. And Creditas specifically is worth a headline because after the end of the quarter, it announced an expansion to its Series-F, which we took part in back at the end of 2021 and to start to '22, and an additional $50 million came into their funding round by Andbank and they closed an M&A transaction to buy a bank, Andbank's local private banking operation in Brazil, which is very positive for -- strategically for them from a funding point of view. So -- and in essence, we'll talk about this, we welcome the contradiction where we've marked Creditas on a more conservative basis versus the market transaction just went through, which is indicative of value upside that we can see in. And the final point is just around -- this is -- our shares are now trading on Nasdaq Stockholm Main Market. And it's indicative of what we're doing at a company level. We keep on moving to improve our company over the long term, putting in places the key tools and pieces that will make us a very attractive investment for investors over the long term as opposed to getting overly caught up in the short-term movements of markets and everything in between. On the numbers front, you've seen this morning, but I think the key numbers to focus on is our NAV in dollars. That's $441 million as of the end of the quarter. That's down just above 40%. And since the start of the year, we started the year at $761 million, which is a peak for us at that point. And from a NAV SEK per share, which is where we kind of trade and trade around, we ended the quarter at [ SEK 4.3 ] or SEK 4.30 per share, down from SEK 6.61 at the start of the year, a 35% move during the first half period. So quite sizable moves less so on the SEK side given the movement in currency of SEK-dollar over the period, but both down 35% to 40% over the period. Moving on to Slide #4, just looking at our net NAV over time, the chart that we show every quarter. This has been gradual and up until the right over time, but obviously, there is windows like this where you get a markdown in NAV as a function of the various parts that feed into that. And this is all market-related and market multiple related. So you can see the significance of the drop. I think the last time we did something like this was back in March '20. There was a significant drop down, it was 25%. It's more significant now. And as we like to think we've got on top of this, a 40% drop [indiscernible] and that's the evolution as we go. Moving into just a few kind of macro comments on markets and fintech stocks and evolution of share prices and multiples. And then I'll pass on to Alexis, as our CIO, who will get a bit more into the detail of our valuation methodology and what it's bought out in this quarter. But over the quarter, year-to-date or the last 12 months, obviously, markets start to come off to 2021 highs. [ And ] general markets in the S&P reflected by the S&P or NASDAQ, the more tech-heavy index, they started to turn off in Q2, an acceleration of those trends. I think more specific to us on the left-hand side is the fintech index. There's been ever perfect barometer to what we do and what we are. But what you've seen is the ARKF index and the FinTech index, both of 47% and 62% year-to-date for the first half period. So once again, going back to that higher beta space, this is listed fintech stocks, both in developed and emerging markets as a reflection of what's in our portfolio. It's not a perfect linkage. We have different names in different countries and different segments, all of which have been hurt to different detriments and the starting points are different. But the indication of the direction of travel over the recent period is quite clear from these charts. And you kind of roll that through into a multiple point of view, and this is very much focusing on short-term valuation multiples, which the market tends to be fixated on. Over time, we tend to invest in long-term valuations and long-term forecast and true cycle multiples. But one has to respect the markets, the short-term nature of the market, the price points today and the reflection of those next 12 months revenues and [ this ] top line, not even bottom line revenues. But you can see with the sell-off in share prices and indexes over this window. And both on the developed market side, we've just taken a few examples of listed bellwether developed market fintech stocks. And on the right-hand side, Brazil, where we're heavy, we've taken a selection of listed Brazilian fintech stocks. Sell down in share prices has been clearly mirrored by a wind down in the valuation of those on a 12-month basis to below 5x forward from what was true cycle previously 10x or even above in developed market, probably less so in Brazil and emerging markets. And what this kind of -- what the process that Alexis is going to walk through you with is as kind of spot out for us in the quarter. It's quite dramatic moves in some of the names in our portfolio. We've reduced the valuation of the top end in names like Creditas and Konfio, 50% and 55%, respectively. I would say, notice, expect that the companies themselves, this is a valuation mark, not a reflection on a company mark. What sticks maybe just pay the third largest company in our portfolio it's actually flattish on a per share basis quarter-on-quarter, but up because we put some more money into that name over the period. But quarter-on-quarter, it's flattish and deservedly so, given that it's still marked at a multiple, which is a discount to related peers. But I think it's the top 3 names that's worth focusing on at 70% of our NAV, and then that's where the NAV has moved most dramatically versus the rest of the portfolio. What I'll do at this point is I'll pass the mic over to Alexis, and he's going to talk a little bit more about our valuation approach and what we've done in this quarter and some of the key takeaways that are worth sharing with you. Over to you, Alexis.

[Alexis Koumoudos, executive]

Thanks, Dave, and hi, everyone. As Dave mentioned, I'm going to delve a bit deeper into the details of our valuation approach for the quarter and the impact on the portfolio. We've worked hard as a team and with our auditors to make sure that our NAV marks reflect a new public market environment and as best as possible conservative fair market value for the portfolio. So as a reminder, our portfolio at the end of second quarter consists of 16 portfolio companies. The breakdown of the valuation methodologies for these 16 companies is as follows. We've got 8 companies that are marked for the last transaction around. This is where the last transaction is recent, relevant and substantial or where the valuation multiples implied by the recent transactions are relatively in line with where listed peers trade at the end of the second quarter. The other half of the portfolio, which is 8 portfolio companies are marked for model, including the calibration methodology reintroduced in this quarter. Calibration methodology applies to 3 of the 8 mark-to-model companies and aims to calibrate the valuation of these portfolio companies who completed recent transactions to significant moves in public markets. This is done if we see that the valuation multiples implied by the transaction have fallen out of the sync with the peer group and therefore, need to be realigned. This is a useful tool we've used in the past, for example, during the public market fallout at the start of COVID-19. So just to summarize what the key impacts are of this on our portfolio and to put it into context, for our 2 largest portfolio companies, Creditas and Konfio we've moved valuation methodology to calibration methodology. By doing this, we calibrated the last transactions to reflect their public group, peer group sell-off overlaying this big move on to their last transaction. For reference, the median peer group rolling forward revenue multiples, both companies have traded down by about 50% over the quarter, which represents the majority of the markdown. The calibrations of these 2 companies valuations has had the biggest impact on our second quarter NAV mark, accounting for 92% of our second quarter NAV change. Other companies in the portfolio, for example, Juspay, which is our third largest portfolio company, we hold at last transaction value. This is held at the last transaction valuation for the following reasons: Firstly, the implied multiple at this valuation represents a discount to key payment peers at the end of the second quarter, while Juspay possesses a lot of strategic value and is growing faster. And secondly, Juspay also raised an additional $18 million of primary capital in June 2022 at the last round valuation, so shares are being bought at this price. Within the top end of the portfolio, Solfacil and Rupeek as well as Juspay, all saw recent substantial top-up investments at last round valuations during the second quarter, giving us a great deal of comfort that the valuations are still relevant today. One point to note and which highlights our conservatism and methodology for establishing our NAV marks is that the majority of our companies -- the majority of our companies, we own share classes with liquidation preference and antidilution rights, but do not take these into account for valuation purposes. So the bottom line is that we've established a rigorous and robust process for determining the fair value of our stakes in portfolio companies. And therefore, on that we have a bias for airing on the side of conservatism in this process. We therefore feel confident in being able to stand behind our reported NAV in this quarter. On the next slide, we've just noted down some comments and caveats that we have for stakeholders and partners to understand a bit more about the valuation methodology and our NAV marks. First of all, we're not price setters or market makers for our portfolio company valuation. So we have no hand in influencing valuations. Second, our companies will continue to raise fresh capital and exit valuations different to our marks. Generally, they've been above, for example, iyzico and Creditas' case. But as you can understand, this is the moving fees. Third, the dynamics for each company, performance and valuation market is unique and so direct comparisons of quarterly moves are not applicable or a reflection of anything other than our valuation process and market or peer group dynamics. Fourth, we're bound by valuation rules as a listed company, and we believe that we are conservatively biased when incorporating them. And lastly, to note, we are -- we're long-term investors and dislike focusing on short-term valuations for our holdings. We're constantly evaluating execution of companies and facing investment decisions on long-term through cycle valuation multiples and perspectives as we always have. For this reason, investment decisions could be taken at different valuations to what the market determines as fair value today. And that's all I have to say on the valuation approaches and key takeaways. I'm sure some people might have questions on this later on.

[David Nangle, executive]

Yes. Super, Alexis. I'm sure they will. Look, continuing the presentation, and we'll wrap up soon and open up for those deck Q&A. But getting on a more positive [ hill ], it's clear that we wanted to get deeper in our reports and in our presentation on our valuation process given the importance of the move -- or the size of the move and the importance of the mechanics going in here. So that's why we went a bit deeper and a bit more technical, but we'll also -- we'll do the Q&A at the end. But getting more onto the upside and where we feel better about life or good about life, it is the top end of the portfolio. I focus on that because it's important for us and for shareholders and we be looking at us to define their near-term success. And that's the 3 names at the top of notice with respect to the other terpene names in our portfolio, just a matter of size and shape of our NAV today. That's Creditas, Konfio and Juspay. And we've got a high degree of confidence in all of these names at this point in this cycle. And what we -- what's been the focus over the last 3 months when we've got really heavy, double clicked in everything as you visited to these companies on the ground in their markets. What you want is your company is at right now to be, a, well-funded, b, a clear path to breakeven to derisk and 3, also delivering you high growth. That's kind of like a golden trilogy. And we're very close to having that at all 3, and we have Creditas, Juspay close to doing that, securing that and Konfio. And that gives you the upside that you want in a private investment, i.e., funded for fast growth, but also the downside protection in markets like this where capital is curse and can be difficult. So we're very confident on these 3 names, and that's kind of -- it's going to be our calling card over the next 6, 12, 18 months, these 3 names and the delivery around these 3 metrics. And then I move on to Creditas specifically, which is nearly half our NAV or was half in Q1, slightly less in this quarter given the move. But you would have seen the press release that we put out off the back of their press releases because they announced an expansion of their Series-F, we took part in the Series-F at the end of '21. And part of that was to do an M&A transaction. But they raised under $50 million on top of the $260 million. They raised in Q4 into Q1. And Andbank, Global Private Bank was the investor in Creditas, now part of the cap table and very welcome to raise at last round valuations obviously is an exception for the best companies in a window like this. As part of that transaction, Creditas acquired the banking franchise license of Andbank still to be regulatory approved, but that will take time to getting there, but they're active as of today. And that's key because it diversifies their funding base from not that it needs diversifying from the local funding market, which has been very deep, rich and support to Creditas over time. But it just gives them strength of their funding both in terms of diversification, funding type, price points, et cetera, to allow them to raise effectively deposits or CDI certificates of deposits in the local market. Also as part of the transaction, that kickstarted as getting equity in the door, which kind of fills a funding gap for Creditas to grow fast to breakeven, which gives us great comfort, but also raising a convertible note, something that they also made public as part of their announcements and to raise up to [ $150 ] million for M&A effectively in a window like this. You want the strong companies who are well capitalized, growing through mopping up opportunities in windows like this, and Creditas obviously is well suited to that given its history. And a couple of other points from that. The overall -- while people get caught up in the short term, both for VEF, for Creditas for everybody's short-term impacts of market moves. Creditas is still forward leaning, forward leaning and raising money for M&A, forward leaning, getting the capital that needs to grow fast to breakeven, forward leaning and moving from its accounts to IFRS away from Brazilian GAAP as part of its path to IPO. And also, it's highlighted some recent headline number in first half revenue top line, which grew over 3x year-on-year kind of showing the market is still growing at an exceptional clip. It will start reporting its quarterly numbers again. It's this move -- this transition to IFRS, which has taken a bit of time as part of the IPO process, and that will be coming soon. I think the bottom line for us for Creditas to you, the investors, is that it has the capital, the proven machine to deliver triple-digit revenue growth, which is still delivering has depth and diversity and funding with this bank license acquisition, true cycle, and it's got a clear funded path to breakeven. And these are things that we all like about Creditas, besides the core machine, which we've talked a lot about in the past. And we get the contradiction of the valuation mark that we've put out in this quarterly report versus the money that Creditas is still raising in the market at market price points at the previous valuation round. We think it's welcome that we are slightly more conservative, and we're very much welcome that they're getting the capital in the door as people look beyond short-term cycle multiples, which is very welcome clearly. And just on Creditas last point. I think the M&A aspect of the story has been very strong in the past. But I think it's a great time for them to be having capital on balance sheet and looking for opportunities in what can be difficult markets for some smaller companies, which have added a lot of strategic value. It could be teams, it could be product, it could be technology, to a name like Creditas as it expands with the ecosystem and as it has done over the last few years, both organically and successfully inorganically. Two more slides. One is just on our NAV and share price. Obviously, there's been an evolution here. The market is very efficient or overly efficient, both on the way up and the way down. Companies like ours tend to trade at a premium. And when you get to peak Q4, i.e., Q4 and it tends to trade at a deep discount when you get to moments like this in the market. We've seen that happen. You look to control the controllables, and that's what we do with VEF as a company, our capital position, our portfolio names. And we know that a cycle will come back over time. We just need to keep on delivering and keep on showing to our clients as we go. And a key point in that is our move to the main board. This is something that was happening over the last 12 to 18 months, but actually did get ratified and was executed on the start of June. So now trading on the main board away from the unregulated NASDAQ First North. We have big aspirations for our company over time and moving to this main board is an indication of that direction of travel. And I think it's -- we promised our biggest shareholders who've been with us through cycle. So of the big names in global fund management even though we're small, we were an unregulated exchange, we were delivering a great story for them, transparent and with a road map to moving regulatory-wise to exchanges like the main board and other aspects moving the holdco back to Sweden and improving the diversity of our Board of Directors. All these things are things that we continue to push forward so that we are a long-term sustainable winner in the space that we're in beyond these short-term cycles, both on the way up and on the way down. So just to summarize before we open up the Q&A. I think we've taken the market pain [ and it stands ] arguably conservatively so. So we stand behind our NAV. We're very comfortable to do that. One can always debate the nuances and valuations of different names and points and we get that and the markets are moving every day, both from share prices, multiples and currencies, but we stand behind our NAV. And our top 3 holdings are in a very strong place. That's Creditas, Konfio and Juspay. I think I've been very clear on why we see them as portfolios, champions and winners and engines of real value creation for us, especially from this point where the marketplace is our share price and our market cap. We have a number of next-generation names coming through starting to shine, and that just gives us that engine room of names that can break up into our top 3 names and start to add real NAV value because it could become more size. I think it's important to note our cash level and our cash cushion and $64 million and net positive cash position just makes us very comfortable at this point in time in the cycle to be sitting here with that. It's not a war chest, so to speak, but it's a very comfortable cash position to ride through the cycle and support our companies as we have done year-to-date. The pipeline is always there keeps on bubbling over. During the quarter, we were in Brazil, India and Indonesia, the first trip to that market. So we still got a go-forward strategy, well playing defense. I'm very comfortable that I think the opportunities at the right price points will start to arrive as the strain of these markets trickle through into the second half of this year. And then just -- I think my message is that we always say we're in this for the long term. And you could say it may be more in windows like this where people are putting pressure on the share price or asking questions around aspects of the business or portfolio. But I think we just keep on putting out statements like this and keep on improving the value creation in the machine and the new paths as always. And operator, I will stop there, and I'll happily open up to the floor for questions.

[Operator]

[Operator Instructions] And the first question comes from the line of Joachim Gunell from DNB.

[Joachim Gunell, analyst]

So I'll rip off the bandage and I know you just like to focus on the short-term valuations here. But 2 questions on that topic. With regards to that, okay, almost 65% of the current NAV is verified as date of Q2 or even, I mean, 2 weeks ago in Creditas. Can you just talk about the relevance of these rounds in terms of whether it's been more entirely existing shareholders who have invested pro rata or I mean, you commented a bit on Creditas here. But I would assume you understand where I'm getting at, whether it's like new investors that are finding the company is attractive at the price points.

[David Nangle, executive]

Yes. No, Joachim, it's a very fair question. Like it's been a mix to be clear. I know with names like Creditas, with a new investor with names like -- sorry, Solfacil as the new investor, Juspay was a mix of current and new investors over the quarter. So I think it's -- we've seen that mixed bag same way even in a 0 down at the smaller end of the portfolio. So it hasn't been group consortiums of internal shareholders putting more capital in to set a price to make us all happy with ourselves. And that hasn't been the case. But what I would say is these rounds also have to be justified by a valuation process of multiples. So if a -- if we feel that we need to be more conservative based on where our market multiples have gone versus the name, which we did with Creditas in fairness, we saw the investment coming. We are very supportive of it. We think it's a great investment. And for Andbank, it'll be a great investment through cycle. Given where market multiples were on that one, we felt sitting down with our audit committee, sitting down with the auditors. And arguably, given the fact that it's that end of our portfolio with a very significant investment, conservatism in the face of these kind of markets was 2% to 4%. I think that's the way I would summarize it. I don't know, Alexis, if you want to overlay anything on top of that.

[Alexis Koumoudos, executive]

Yes. I think it's a good summary. I think -- and we gave the example of Juspay, so Juspay actually -- so they raised $18 million of primary capital in June. Just before that, there was a very large secondary transaction as well of about $15 million at last round valuation, and that was -- both of those are a combination of new investors coming in and existing investors taking up rights.

[Joachim Gunell, analyst]

That's very clear. And I must say that I appreciate this more, call it, transparent framework that you alluded to here in these results, helping us understand how you think, and I think that the market Creditas your conservatism into this trading. But perhaps, Alexis, if you can be a bit more detailed on, say, for the top 3 holdings, in the last quarterly report, you commented a bit actually on what multiples you use. But is there anything you can say, Creditas, we have -- I mean your ambitions to grow 2x this year, et cetera. But can you say anything about the specific sales multiple on Creditas, Juspay and Konfio, at this stage.

[Alexis Koumoudos, executive]

Yes. So what I would say on specific multiple is that the way that we are valuing -- so the 2 companies, the top 2 companies, Creditas and Konfio that are marked at -- on a calibration methodology. The methodology itself just aims to recalibrate the last transaction to a dramatic move in the market. We're not hanging our hat on any specific multiple. And so I don't think it's -- that's not how we look at valuing the businesses today. Other than, obviously, the multiple that's being spat out is very much in line with where public peers are trading. And Juspay exactly the same thing. In fact, Juspay -- the implied multiple -- valuation multiple is now at a discount to listed payment peers.

[Joachim Gunell, analyst]

Okay. I'll try to do the backwards calculation. It was worth to shot at least. So 2 more questions. Can you possibly say, quantify the funding of the aggregate portfolio over the, say, coming 12 months? I mean, obviously, you're well funded now with proactive balance sheet management with the bond, et cetera. But you said that, okay, for the 3 top holdings, they have already or are in the process of securing funds, Creditas and Konfio -- sorry, just we have obviously already done so very recently. Is it only, say, Konfio that you would expect to raise further capital in 2022? Or will we see extension rounds in all of the top 3 names?

[David Nangle, executive]

Yes. It's a super fair question. One that was a little bit of a movable feast, obviously, given the business that we're in, and obviously, the movement in the markets. But I think as we sit here today, given what the money these companies, our portfolio on average raised last year, big checks and some of the deals done year-to-date, either including the top 3, Creditas most recently in Juspay. I think our predicted outlays are relatively small, at least let's say, to year-end. That's most of predictions. Konfio of top 3 is the one that's most likely to get a check from us as part of any near-term funding round or funding round before year-end. But beyond that, and we've gone through this backwards and forwards, we're quite light on portfolio capital needs as we sit here today. So I would say, a conservative assumption is 1/4 of the cash pile that we have today may be used for portfolio needs by year-end.

[Joachim Gunell, analyst]

Very clear. And finally, just from my end, just balancing the fact that, okay, with $64 million in cash available, the trade-off here that now that you've completed the list change, I mean, obviously, you are in a position to conduct buybacks. So can you say anything about how you trade this opportunity off? I mean if we were to use Creditas, call it, the most recent valuation around, you're trading at a 60% plus discount to NAV. So is it reasonable to conduct buybacks or do you prefer to take a more preserved cash to support the underlying portfolio at this stage?

[David Nangle, executive]

Yes. No, it's a super fair question. Look, I think it comes with the upfront statement that were pro buybacks. We're pro value creation, we're pro buying back our shares at deep discounts and buying back our portfolio that we believe in and an app that we believe in at a deep discount. So I think that's the statement out the door. And then I'm going to caveat that with effectively conservatism and prudence at this stage. We sat down and talked with our Audit Committee, our Board just amongst ourselves. There's so many moving parts in the markets right now that we would rather be cashed up and conservative as opposed to cash up and shopping, including our own portfolio via the share price today. And I just say that in the -- we've seen many cycles like this before, and we do believe that our cash will be worth more tomorrow than it is today. And also the things that we can't predict that will happen tomorrow that happen yet, happen today are in the portfolio with our NAV over the next quarter or 2. So I'd rather -- we'd rather stay on the side of conservatism and sit back on that ideology of buying back right now. But we are in a position to do it. We can get permission quite quickly, should we feel more confident. I think our cash position gives us confidence as a company. But I don't want to be overly clever and make big bold bets that we end up in a quarter or 2 in a position where we thought we were being clever, but we've got less cash and we really need it. So I think it's the benefit of all. We sit on that today. And just one final caveat there is we did do the bond in Q1 -- by the end of Q1. It was a very positive thing to do, for us to do in terms of having a cash pile and a war chest or just liquidity in a window like this. But we do need to watch the terms of those bonds and make sure we don't cross any lines. And we're nowhere near that yet. We're in a comfortable position. But given market movements around NAV, et cetera, one needs to be careful that one doesn't. So I'd rather be more conservative on the cash power today than doing anything with it unless they have to in terms of supporting core portfolio companies.

[Operator]

We will now take the next question. And the next question comes from the line of Andrew Stimpson from KBW.

[Andrew Stimpson, analyst]

You might have answered this one already, just at the end there, but maybe a little clarification on the cash and the liquid assets, which, as you said, is sitting at $64 million, which is pretty healthy. What's the lowest number you'd be comfortable seeing that go to? Presumably, that can't -- or you wouldn't ever see that going down to 0. And then much of that remaining is subject to the sustainable bond covenants, which I guess there are some as you just alluded to in your answer. And then I've got one more on valuation methodology afterwards, please.

[David Nangle, executive]

Okay. Andrew, thanks for that. Look, as of end of the quarter, $64 million of cash and close to a net positive cash position of $14 million, $15 million if you take out the bond that's due in 3 years from a quarter ago. So in a decent cash, we're in a net positive cash position. We're obviously in a decent cash position. I'm very happy we talked about this as a team. We're very happy to be net cash positive in this environment where the market is looking for any signs of weakness from any company. Now that we have weaknesses, and we'd be happy to spend that money if need be, but I'm quite comfortable sitting here in this kind of environment in net cash positive position. And that's one thing. But we will support our companies and put our capital to work over the next, say, 12 months. And so that will probably go past that line and go net negative, I would say, it's going to be hard to avoid that with coupon payments of costs and with some portfolio needs as we go. But it will keep us back from doing anything right now. Until we see our share price improving, being more realistic versus our NAV, the markets improving, i.e., the openness of the market to give us more equity [indiscernible] and those markets improving obviously leads to the improved conviction for us that those exits we talked about, namely Creditas in the recent past has become and a forecastable option, again, which one point it hard to see in windows like this. So I wouldn't like to put hard numbers or lines in it, but we're very comfortable with the position that we sit in today, and we're not looking to eradicate that comfortable position quickly.

[Andrew Stimpson, analyst]

Got it. That's very clear. And then secondly, on the valuation methodology, that all the extra helpful -- sorry, all the extra detail that you guys provided there was very helpful. I'd say thank you for that. And I totally get it on the more conservative marks you've used this quarter. Just a question on the mechanics of it from here. Generally, when you use the calibration method but have been transactions recently, how long do you tend to keep the calibration method for? Is it just a one quarter thing? Or can you have it like that for several quarters? Or is there a point at which the auditors make you justify it some other way in a quarter or 2? Or how does that evolution look like from here on the methodology, please?

[David Nangle, executive]

Alexis, do you want to grab that?

[Alexis Koumoudos, executive]

Yes, sure. Yes. So generally, what we do is we will be evaluating it for each quarter with our auditors. But I would say, historically, as we had with COVID, when we went into using calibration methodology for some of our portfolio companies, once we go to calibration methodology, we tend to stick with it until we roll off the last transaction and into a full mark to model. So that is likely to be the path forward for the calibration methodology companies.

[Operator]

We will now take the next question. And the next question comes from the line of Herman Wartoft from Pareto Securities.

[Herman Wartoft, analyst]

Happy to hear you surviving the heat today. Just one question for me, I think. Just on Creditas, I mean, what are you seeing there in terms of repricing of the loan book and I mean, passing on the higher funding cost to the customer. I think we talked about this in Q1, and I promised you to come back in Q2. And also related to that, can you just elaborate a little bit on what the banking license will mean for Creditas more concretely for the cost of funding?

[David Nangle, executive]

Yes. Super. Thanks, Herman, and good to hear your voice. Look, on the loan book at Creditas, what they've been doing, and they've been quite open about this and in line with market trends. They've been repricing on the asset side of the loans that they underwrite an auto home, payroll since Q4 of last year, in line with the rise in the base rates in Brazil and the rise of market rates across the board. So they've been on asset repricing trend Q4 right up to date, and that probably still continues as of today, just incrementally adding 50 bps or 100 basis points per month, give or take on different loans. And probably a broad-based 10% differential. You can see from the average of the portfolio, albeit a mix from about 30% towards 40%. Those are kind of average indications. And what they've been clear with is that given the nature of their funding versus the nature of their lending with the rising rates in Brazil, they get hit first as their funding instruments reprice almost immediately on a monthly basis in line with inflation and local base rates, but their asset pricing that was fixed, lead prices gradually over time as new loans come through. So they will -- are feeling that downdraft of funding pressure in Q4 into the first half of this year. But then they get the uplift of the repricing into the second half of this year and into next year. So it's -- it's kind of when you'll see in a cycle over time at Creditas, it will be very linked to that interest rate cycle given the nature of its assets and liabilities today. So that process continues, but we're past the part where it's hurting on the funding side, but not getting the benefit on the asset side to now start the feed-through to the asset side, which is quite nice to see. And then on the funding question, yes, look, the banking license was something that was always knocked around at Creditas at board level. It's something that hasn't been needed. It's a very -- unlike most emerging markets is a very deep and rich local funding market in Brazil. And that's why it's one of the reasons why we like it so much. The Creditas has been able to fund itself directly in local markets, in local currencies with duration mass securitization of the [ stalled ] vehicles, which has been great for a, company like Creditas to get us it's loan booked $0.5 billion towards $1 billion and beyond with local domestic matched funding, which you don't get in many emerging markets. And that said, they've always had one eye on diversification, either going international, international bonds and obviously translating that back in or more domestically going to deposit route. And I think this Andbank transaction as well as obviously getting equity into Creditas, which is very welcome and getting a great partner in Andbank. It also gives us the banking license, and that gives us access to deposits. It's not necessarily that Creditas is not a digital bank. It's not going to wake up tomorrow with a mass gathering deposit machine, but you see in other digital banks and other markets. More likely, they will use investment management and private banking platforms to place certificates of deposits at a variety of durations and rates that match their funding -- their loan books and things like short duration payroll or auto. So what it will do is it will give a diversity through cycle, which is a general positive. It should be in theory at lower rates and then their funding structures, but that will be seen over time. So I'd like to think it's the diversity that you get that gives you downside risk protection, and you completely [indiscernible] get into lower [indiscernible] to kick in and what price they can actually place that out versus the current vehicles. But I would very much think it would be [indiscernible] on the cost of funding front.

[Operator]

There are no further questions at this time. I would like to hand back over the conference to David Nangle for final remarks.

[David Nangle, executive]

Yes. Super. Thank you. Well, thanks, everybody, for taking time out from the middle of the summer to join us on our call today. We're very aware that the headline is not the best of news in terms of moving a NAV down 40% quarter-on-quarter. But we'd like to think that it was well flagged if even buy at the nature of what markets have done and a lot of the peers that we trade against than what they've done over that period. What I would also like to say is that we're feeling very confident in our positioning of the company and our balance sheet and specifically mostly our portfolio of companies in the top end that I've talked a lot about in this window. So -- we're very aware of the strain and stress in the system. We believe we've taken it on the chin and our NAV and feeling confident about life, albeit we know we have to get through these market cycle and start seeing the benefits in our share price and beyond. But any questions you have, anything we said today or beyond that, feel free to get in touch directly myself or Henrik Stenlund who runs our Investor Relations department and [indiscernible] department directly. Thank you.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.