v3.26.1
Fair Value Of Financial Instruments
 9 Months Ended
Mar. 31, 2026
Fair Value Of Financial Instruments [Abstract]  
Fair Value Of Financial Instruments
5.
Fair value of financial instruments
Initial recognition and measurement
Financial instruments
are recognized
when the
Company becomes
a party
to the
transaction. Initial
measurements are
at cost,
which includes transaction costs.
Risk management
The Company manages its exposure
to currency exchange, translation, interest rate,
credit, microlending credit and equity price
and liquidity risks as discussed below.
Currency exchange risk
The Company is subject to currency exchange risk because it purchases components
for its vaults, that the Company assembles,
and inventories
that it is
required to
settle in other
currencies, primarily
the euro, renminbi,
and U.S. dollar.
The Company
has used
forward contracts in order to limit its
exposure in these transactions to fluctuations
in exchange rates between the South African
rand
(“ZAR”), on the one hand, and the U.S. dollar and the euro, on the other hand.
Translation risk
Translation risk relates to
the risk that
the Company’s results of operations
will vary significantly
as the U.S.
dollar is its
reporting
currency,
but it earns a
significant amount of its
revenues and incurs a
significant amount of its
expenses in ZAR. The
U.S. dollar to
the ZAR
exchange rate
has fluctuated
significantly over
the past
three years.
As exchange
rates are
outside the
Company’s
control,
there can be no
assurance that future fluctuations will
not adversely affect the Company’s results of operations and
financial condition.
5.
Fair value of financial instruments (continued)
Risk management (continued)
Interest rate risk
As a result of its
normal borrowing activities, the Company’s operating results are exposed to fluctuations in
interest rates, which
it manages
primarily
through regular
financing
activities. Interest
rates in
South
Africa have
generally
declined in
recent quarters.
However,
the escalation of
conflict in the
Middle East has
increased oil and
commodity prices and
contributed to heightened
global
market volatility.
This is expected to exert upward pressure on inflation in the near term, which may
result in interest rates increasing
toward the end of the year or early next year. Therefore, ignoring the impact of changes to the margin on its borrowings (refer to Note
9) and
value of
borrowings outstanding,
the Company
expects its
cost of
borrowing to
increase moderately
if interest
rates were
to
increase in the future.
The
Company
periodically
evaluates
the
cost
and
effectiveness
of
interest
rate
hedging
strategies
to
manage
this
risk.
The
Company
generally
maintains
surplus
cash
in
cash
equivalents
and
held
to
maturity
investments
and
has
occasionally
invested
in
marketable securities.
Credit risk
Credit
risk
relates
to
the
risk
of
loss
that
the
Company
would
incur
as
a
result
of
non-performance
by
counterparties.
The
Company
maintains
credit
risk
policies
in
respect
of
its
counterparties
to
minimize
overall
credit
risk.
These
policies
include
an
evaluation
of
a
potential
counterparty’s
financial
condition,
credit
rating,
and
other
credit
criteria
and
risk
mitigation
tools
as
the
Company’s
management deems
appropriate.
With
respect to
credit risk
on certain
financial instruments,
the Company
maintains
a
policy of entering
into such transactions only
with South African
and European financial
institutions that have
a credit rating
of “B”
(or its equivalent) or better, as determined by
credit rating agencies such as Standard & Poor’s, Moody’s
and Fitch Ratings.
Consumer microlending credit
risk
The Company
is exposed
to credit
risk in
its Consumer
microlending activities,
which provides
unsecured short-term
loans to
qualifying customers.
Credit bureau
checks as
well as
an affordability
test are
conducted as
part of
the origination
process, both
of
which are in line with local regulations. The Company considers this
policy to be appropriate because the affordability test it
performs
takes into account
a variety of
factors such
as other debts
and total expenditures
on normal household
and lifestyle expenses.
Additional
allowances
may
be required
should the
ability of
its customers
to make
payments when
due
deteriorate
in the
future. Judgment
is
required to assess
the ultimate recoverability
of these finance
loan receivables, including
ongoing evaluation
of the creditworthiness
of each customer.
Merchant lending
The Company maintains an allowance for
doubtful finance loans receivable related to
its Merchant services segment with
respect
to short-term loans to qualifying merchant customers. The
Company’s risk management procedures include adhering to its proprietary
lending criteria which uses
an online-system loan application
process, obtaining necessary customer transaction-history
data and credit
bureau checks.
The Company considers
these procedures
to be appropriate
because it takes
into account
a variety of
factors such
as
the customer’s credit capacity and customer-specific
risk factors when originating a loan.
Equity price and liquidity risk
Equity price risk relates to the risk of loss that the Company would incur as a result of the volatility in the exchange-traded price
of equity
securities that
it holds
from time
to time.
The market
price of
these securities
may fluctuate
for a
variety of
reasons and,
consequently,
the
amount
that
the
Company
may
obtain
in
a
subsequent
sale of
these
securities
may
significantly
differ
from
the
reported market value.
Equity liquidity risk
relates to the risk
of loss that the
Company would incur as
a result of the lack
of liquidity on the
exchange
on
which
those
securities
are
listed.
The
Company
may
not be
able
to
sell some
or
all
of
these
securities
at
one
time,
or
over
an
extended period of time without influencing the exchange-traded price,
or at all.
5.
Fair value of financial instruments (continued)
Financial instruments
The following
section describes
the valuation
methodologies the
Company uses
to measure
its significant
financial assets
and
liabilities at fair value.
In general, and where applicable, the Company uses quoted prices in
active markets for identical assets or liabilities
to determine
fair value.
This pricing
methodology would
apply to
Level 1
investments. If quoted
prices in
active markets
for identical
assets or
liabilities are
not available
to determine
fair value,
then the
Company uses
quoted
prices for
similar assets
and
liabilities or
inputs
other
than
the
quoted
prices
that
are
observable
either
directly
or
indirectly. These
investments
would
be included
in
Level
2
investments. In
circumstances
in
which
inputs
are
generally
unobservable,
values
typically
reflect
management’s
estimates
of
assumptions that market participants would use in pricing the asset or liability.
The fair values are therefore determined using model-
based techniques that include
option pricing models, discounted
cash flow models, and
similar techniques. Investments
valued using
such techniques are included in Level 3 investments.
Asset measured at fair value using significant unobservable inputs – investment
in Cell C
The Company
held
75,000,000
class “A” shares
in Cell
C Limited
(“Cell C”), a
significant mobile
telecoms provider
in South
Africa.
In November 2025,
Cell C completed a
restructuring process in anticipation
of its listing on
the securities exchange
operated
by the JSE Limited. Under this process, a new holding company,
Cell C Holdings Limited (“Cell C Listco”), was established for Cell
C, with a transaction
step including the transfer
of shares in Cell
C by its existing
shareholders to Cell C
Listco in exchange
for Cell
C Listco issuing shares to
the existing Cell C shareholders
(the “Flip-up”). The
Company exchanged its
75,000,000
class “A” shares
in Cell C for
76,590
shares in Cell C Listco. Cell C Listco listed on November 23, 2025.
On October 31, 2025, in considering the proposed restructure
and listing of Cell C Listco, Lesaka SA entered into an agreement
with The
Prepaid Company
Proprietary Limited
(“TPC”) to
dispose of
its shares
in Cell
C (or,
after the
Flip-up is
implemented, its
shares in Cell C Listco) (“Relevant Shares”), if certain conditions were met. Under
the terms of the agreement, if:
●
the listing
occurred by
November 30,
2025, and
the value
of Lesaka
SA’s
shares in
Cell C
was less
than ZAR
50
million,
then Lesaka SA could choose to either hold the shares, or sell the Relevant Shares to TPC for a purchase price equal to ZAR
50
million; or
●
the listing did
not occur by
November 30, 2025
(or, earlier
than this date,
it is determined
that the listing
will not proceed),
then Lesaka SA
could sell the Relevant
Shares to TPC for
ZAR
35
million. If, after
this sale and before
April 30, 2026, the
Listing occurs and the
list price per share
(“A”) is more than the
price paid to Lesaka
SA per Relevant Share
(the aggregate
ZAR
35
million) (“B”), then TPC shall pay an amount equal to the difference between A and B, multiplied by the number of
Relevant Shares to Lesaka SA as a top-up to the purchase consideration.
The value of Lesaka SA’s
shares in Cell C Listco was less than ZAR
50
million on listing and Lesaka SA elected to sell its Cell
C Listco shares to TPC for ZAR
50
million ($
3.0
million) and received the cash proceeds in December 2025.
The
Company’s
Level
3
asset
represented
an
investment
of
75,000,000
class
“A”
shares
in
Cell
C.
The
Company
used
a
discounted cash
flow model
developed by
the Company
to determine
the fair value
of its
investment in
Cell C as
of June
30, 2025,
and valued Cell C
at $
0.0
(zero) as of June
30, 2025. The Company
assumed that Cell C’s
deferred tax assets would
be utilized over
the forecast period. The Company has assumed a marketability discount of
15
% as of June 2025 and a minority discount of
17
%. The
Company utilized the latest business plan provided
by Cell C management for the period ended May 31, 2030,
for the June 30, 2025,
valuation.
The following key valuation inputs were used as of June 30, 2025:
Weighted Average
Cost of Capital ("WACC"):
24
%
Long term growth rate:
4.5
%
Marketability discount:
15
%
Minority discount:
17
%
Net adjusted external debt - June 30, 2025:
(1)
ZAR
8.3
billion ($
0.5
billion), no lease liabilities included
(1) translated from ZAR to U.S. dollars at exchange rates applicable as of
June 30, 2025.
5.
Fair value of financial instruments (continued)
The following table presents
the Company’s
assets measured at fair value
on a recurring basis as
of March 31, 2026,
according
to the fair value hierarchy:
Quoted Price in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Assets
Related to insurance
business:
$
$
$
$
Cash, cash equivalents and
restricted cash (included
in other long-term assets)
134
-
-
134
Fixed maturity
investments (included in
cash and cash equivalents)
4,233
-
-
4,233
Total assets at fair value
$
4,367
$
-
$
-
$
4,367
The following table presents the
Company’s assets measured
at fair value on a recurring basis as of
June 30, 2025, according to
the fair value hierarchy:
Quoted Price in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Assets
Investment in Cell C
$
-
$
-
$
-
$
-
Related to insurance business
Cash and cash equivalents
(included in other long-term
assets)
125
-
-
125
Fixed maturity investments
(included in cash and cash
equivalents)
4,739
-
-
4,739
Total assets at fair value
$
4,864
$
-
$
-
$
4,864
During the nine months ended March 31, 2026, the Company
transferred its investment in Cell C Listco out
of Level 3 following
the
disposal
of
these
equity
securities.
During
the
nine
months
ended
March
31,
2026,
the
Company
recorded
an
increase
in
the
carrying value of its investment in Cell C Listco prior to the disposal of these
equity securities.
There were
no
transfers in or out of Level 3 during
the three months ended March 31, 2026
or during the three and nine months
ended March
31, 2025,
respectively.
There was
no
movement in
the carrying
value of
assets measured
at fair
value on
a recurring
basis, and categorized within
Level 3, during the
three months ended March
31, 2026 or
during the three and
nine months ended March
31, 2025, respectively.
Summarized below is the movement in the carrying value of
assets and liabilities measured at fair value on a recurring
basis, and
categorized within Level 3, during the nine months ended March 31, 2026:
Carrying value
Assets
Balance as of June 30, 2025
$
-
Gain on fair value re-measurement
2,971
Disposal of investment in Cell C
(2,971)
Foreign currency adjustment
(1)
-
Balance as of March 31, 2026
$
-
(1) The foreign currency adjustment represents the effects of the fluctuations of the
South African rand against the U.S. dollar on
t
he carrying value.
5.
Fair value of financial instruments (continued)
Summarized below is the movement in the carrying value
of assets and liabilities measured at fair value on
a recurring basis, and
categorized within Level 3, during the nine months ended March 31, 2025:
Carrying value
Assets
Balance as of June 30, 2024
$
-
Foreign currency adjustment
(1)
-
Balance as of March 31, 2025
$
-
(1) The
foreign currency
adjustment represents the
effects of
the fluctuations
of the South
African rand
against the U.S.
dollar
on the carrying value.
Assets measured at fair value on a nonrecurring basis
The Company
measures equity
investments without
readily determinable
fair values
at fair value
on a
nonrecurring basis.
The
fair values of
these investments
are determined
based on
valuation techniques
using the best
information available
and may include
quoted market prices, market comparables, and discounted cash flow
projections. An impairment charge is recorded when the cost
of
the
asset
exceeds
its
fair
value
and
the
excess
is
determined
to
be
other-than-temporary.
The
Company
has
no
liabilities
that
are
measured at fair value on a nonrecurring basis.