VEF AB Earnings Call: NAV Growth vs. Debt Overhang

VEF AB ((SE:VEFAB)) has held its Q4 earnings call. Read on for the main highlights of the call.

VEF AB Earnings Call Highlights: Strong NAV Momentum Amid Balance Sheet Constraints

The latest earnings call from VEF AB painted a picture of solid underlying performance and valuation progress, set against lingering balance sheet pressures and market skepticism. Management emphasized robust net asset value (NAV) growth, successful portfolio company fundraises, and a series of profitable exits that converted paper gains into cash. At the same time, a negative net cash position, a bond maturity approaching in 2026, and a roughly 50% discount of the share price to NAV underlined a cautious tone. The overall message was one of operational strength and improving valuation support, tempered by a clear focus on deleveraging and careful capital allocation.

Robust NAV Growth in Dollar Terms

VEF’s NAV performance was a central theme. In dollar terms, NAV increased 6.9% in the fourth quarter of 2025 and 22.9% for the full year, reaching $434 million. This NAV expansion underscores that the value of the underlying portfolio continues to move higher despite a difficult broader market backdrop. The company’s ability to grow NAV at a double‑digit rate over the year suggests that its core fintech holdings across emerging markets are regaining growth momentum and attracting capital at higher valuations.

Per-Share NAV Boosted by Buybacks

On a per‑share basis, NAV rose roughly 26% year-on-year, a stronger gain than the headline NAV growth due to the impact of share buybacks earlier in 2025. By reducing the share count while NAV increased, VEF enhanced value for remaining shareholders. While the buyback program has since been paused to conserve liquidity, the numbers demonstrate that prior repurchases were accretive and helped compound per‑share value even as the market price failed to keep pace.

Creditas as a Key Value Driver and Funding Catalyst

Creditas was the standout value driver in the quarter. The Brazilian fintech closed a $108 million Series G round in December, shifting its valuation from a mark‑to‑model basis to a latest‑transaction benchmark and generating a roughly $33 million uplift to VEF’s NAV. Creditas delivered about 20% year-on-year loan growth in Q4, while management highlighted improving revenue trends, rising efficiency supported by AI tools, and franchise upgrades including a newly approved Brazilian bank license and the senior appointment of Ricardo Forcano. VEF’s stake, at around 9% post-convertible note conversions, remains meaningful, positioning the company to benefit if Creditas continues to scale under its strengthened regulatory and operating platform.

Portfolio Valuation Mix Increasingly Backed by Transactions

Another key takeaway was the improved quality of valuation inputs across the portfolio. Management reported that 69% of the portfolio is now valued using latest transaction prices, while 31% remains mark‑to‑model. Importantly, for more than 90% of the mark‑to‑model holdings, valuations are anchored on multiples further down the profit and loss statement—below revenue level—indicating conservative assumptions. This mix suggests that a large portion of NAV is now supported by real market transactions, and that there may be further upside as additional portfolio companies attract funding rounds or strategic interest.

Realized Exits and NAV-to-Cash Conversion

VEF emphasized the progress made in turning NAV gains into cash over the past 12 months. The company executed three exits, including a notable secondary/exit in Juspay, which alone generated approximately $37 million in gross proceeds. In total, around $37 million of appreciating NAV was converted into cash, contributing to an $81 million positive NAV evolution for the year. This ability to crystallize value in a tough funding environment is crucial for supporting the balance sheet, enabling debt reduction, and ultimately creating options for future capital deployment.

Juspay’s Growth Underpins Recurring Value Creation

Juspay continues to be a strong growth engine within the portfolio. The India-based payments and fintech infrastructure player grew its top line by about 40% in calendar 2025, and both company management and VEF expect a similar or even stronger trajectory in 2026, with guidance of roughly 40–50% revenue growth. This growth profile supports the case for recurring value creation and potential future valuation uplifts, even after VEF realized a portion of its gains via the recent secondary transaction.

Self-Sustaining Portfolio Growth Resumes

Beyond the headline names, VEF reported that its portfolio overall is growing at a self-sustaining pace of around 25–30% year-on-year. Flagship holdings such as Creditas, Konfio, and Juspay are back to “healthy” growth rates with visible compounding potential over the medium term. This suggests that VEF’s exposure remains well positioned to benefit from the ongoing digitalization of financial services in its key markets, even though the public market valuation of VEF’s own shares has not yet reflected this underlying momentum.

Balance Sheet Actions and Path Toward Deleveraging

On the balance sheet, management highlighted concrete steps already taken and a clear plan going forward. During 2025, VEF repaid roughly half of its outstanding bonds and executed share buybacks earlier in the year. The company ended Q4 with $15.9 million in cash and liquid assets and has articulated an intention to continue strengthening its capital structure, with a goal of reaching a net-zero debt position by year-end according to management’s plan. This deleveraging focus is seen as critical to reducing risk, improving financial flexibility, and eventually enabling more aggressive capital deployment when conditions permit.

Persistent 50% Discount to NAV and Weak Share Price Response

Despite the strong NAV performance, VEF’s share price has remained notably weak. Shares trade at an approximate 50% discount to NAV, with the stock flat year-on-year and only modestly up around 3.3% in Q4. This gap signals continued market skepticism about the sustainability of NAV growth, the realizability of valuations, and the company’s ability to manage its balance sheet and funding needs. For investors, the discount offers potential upside if VEF continues to convert NAV into cash and the market gains confidence in its portfolio and deleveraging strategy, but it also reflects perceived execution and liquidity risks.

Negative Net Cash and 2026 Bond Maturity

A major constraint discussed on the call was VEF’s current negative net cash position. While the company ended Q4 with $15.9 million in cash, it still has approximately $26.1 million of bonds outstanding, due at the end of 2026. This creates a near- to medium-term liquidity challenge that will require further exits, refinancing, or other cash-generating measures. Management’s emphasis on reaching net-zero debt highlights the urgency of addressing this overhang and underscores why capital allocation is currently skewed toward debt reduction rather than aggressive new investments or buybacks.

Buyback Pause Highlights Capital Allocation Dilemmas

Management confirmed that the share buyback program was paused in the fourth quarter to preserve liquidity and focus on balance sheet resilience. Near-term capital allocation priorities—how to balance buybacks, debt paydown, and selective new investments—remain fluid and dependent on the timing and scale of future exits and cash inflows. While buybacks have demonstrated their ability to enhance per‑share NAV, the company is choosing a more conservative stance until its debt burden and liquidity position are further improved, leaving some uncertainty around how and when excess capital will be returned to shareholders.

Mark-to-Model Exposure and Market Volatility

Although the share of mark‑to‑model valuations has declined, about 31% of the portfolio remains in this category. These holdings saw only slight positive growth, partly offset by broader market pullbacks during the period. The lack of recent transactions introduces some valuation uncertainty until more external pricing events occur. Management pointed out that most of these positions are valued using conservative profit-based multiples, but investors will likely continue to scrutinize this part of the portfolio closely, particularly in a volatile market environment.

Regulatory and Timing Uncertainty Around Konfio

Konfio, another key portfolio company, is delivering around 20% loan and top-line growth and is already cash flow positive. However, the timeline for its banking license approval remains uncertain. Management expressed confidence that approval will ultimately be granted but stressed that regulatory processes and timing can be unpredictable. This injects an element of timing risk into the investment case: successful licensing could unlock additional growth and valuation upside, but delays could weigh on sentiment and slow down the pace at which Konfio can expand its product set.

Execution Risk on Future Exits

VEF’s recent track record of three exits over 12 months demonstrates that management can execute deals even in a challenging environment. However, the call made clear that such exits are difficult to predict in both timing and magnitude. Future cash inflows—and with them VEF’s ability to reduce debt, resume buybacks, or make new investments—depend heavily on the successful realization of further exits. This introduces execution risk: while the pipeline is described as healthy, investors must factor in the possibility of delays or smaller-than-expected realizations.

Forward-Looking Guidance and Outlook

Management expects VEF’s recovery to continue into 2026, anchored by the portfolio’s current growth trajectory and improving transaction-backed valuations. They highlighted the 6.9% Q4 NAV increase and 22.9% full-year NAV growth to $434 million, alongside an $81 million positive NAV evolution and a 26% rise in per-share NAV after buybacks. Creditas’ recent $108 million Series G round and ongoing 20% loan growth, Juspay’s roughly 40% top-line growth in 2025 with guidance of 40–50% in 2026, and Konfio’s 20% growth with upside potential to 30%+ underpin expectations for continued portfolio expansion. On the capital side, VEF converted $37 million of NAV to cash in 2025, improving its cash position despite bond repayments, and aims to be debt-free by year-end while still pursuing selective new investments and opportunities to narrow the roughly 50% discount to NAV. This guidance reflects a cautiously optimistic stance: growth and value creation are expected to continue, but within a framework that prioritizes balance sheet strength.

In summary, VEF AB’s earnings call blended strong operational and valuation progress with a sober assessment of its balance sheet and market perception. NAV and per-share NAV rose sharply, key holdings like Creditas and Juspay are growing quickly, and management has demonstrated an ability to realize exits and turn NAV into cash. Yet a negative net cash position, an upcoming bond maturity, and a deep discount to NAV keep the focus squarely on deleveraging and disciplined capital allocation. For investors, the story is one of solid underlying fundamentals with clear upside potential, but dependent on successful execution of exits and balance sheet repair in the coming quarters.