After having gone through a rebranding process that took about 10 months, which unified three of its main pillars—agility on the market, care and transparency for its investors, and a more competitive and efficient approach to its work, Transilvania Investments has a positive outlook for the future. In terms of its investment strategy, the company supports smart, fresh business ideas from all areas of entrepreneurship, without limiting its focus to a certain niche. Radu Rosca, Executive President of Transilvania Investments, sat down with Business Review to talk about the company’s development strategy in tourism, its core business priorities, and expectations for the local economy in the second half of 2022.
By Anda Sebesi
Transilvania Investments recorded a profit growth of 18 percent y/y in H1 2022. What were the factors that contributed to this growth and do you have any guiding principles for the second half of this year?
Our profit growth in the first half of this year was the result of higher revenues on the dividend side, coming mainly from the banking sector. This constituted the largest part of our revenues and it was obtained alongside a strict control of our costs, enhancing the fund’s performance. For the rest of the year, our focus will remain on the increase of our portfolio’s productivity and therefore an increase of our revenues, in close connection with the ability of companies in our portfolio to face the current macroeconomic context. We also aim to maintain continuous control of our expenses, to the benefit of our shareholders.
How was the company’s rebranding process implemented and what does it mean for different stakeholders?
The rebranding process took about 10 months and involved not only changing the company’s identity, but also unifying everything that it stands for: agility on the market, care and transparency for our investors, and a more competitive and efficient approach to our work. Transilvania Investments embodies our team’s ambitions, energy, and commitment to stakeholders. The process is ongoing and we need time to prove that we can deliver on our promises, but the vibe generated by redefining our path has been positive and encouraging.
Have you updated your team structure along with the rebranding move?
The new identity of Transilvania Investments brings a new culture within the company and a new approach to everything related to talent management. On the one hand, we have talented people who have been working with us for decades, and we need to inspire them with clearer career paths and growth opportunities within the new strategic directions we’ve adopted. On the other hand, we’ve had the opportunity to bring in young, agile people with an appetite for fields like private equity or venture capital. These are two of the new areas we intend to strongly develop, and we have already hired young professionals who are ready to explore the world of tech, startups, and other innovative sectors. Sustainable development with an innovative vision has become a clear guiding concept for us and it has led us to invest in new resources for our key departments such as Portfolio Management, IT, and Business Development.
Independenta Sibiu – a unique urban regeneration project
In June, Transilvania Investments launched the first phase of a unique project in Sibiu: the reintegration of the old Independenta Sibiu industrial site into community life. As a major shareholder of the company that owns the 8 hectare land plot, Transilvania Investments has encouraged a complex approach to the process. By using the Urban Design Management methodology, the company intends to transform future investments in the area to create added value for the citizens of Sibiu.
Three rounds of meetings with stakeholders have been organised so far, with dozens of representatives from local authorities, NGOs, investors, culture institutions, and people living in the neighborhood attending. Each of them have had the chance to express their vision, needs, and expectations regarding the space located in a strategic area of the city. From residential buildings to parks and even a museum, all ideas coming from participants will contribute to the design of the site masterplan.
The final goal is to transform the industrial site into a space that responds to the community’s needs, turning a blighted area into an economically and socially productive one. Located in the heart of the city, the Independenta Sibiu regeneration project could both bring the area back to life and serve as a good example for other cities in Romania that are facing the problem of abandoned industrial sites.
Some of your biggest holdings are in tourism companies operating in Romania. What is your development strategy for this sector and how can this industry attract more investments?
With a growing demand for internal tourism during the pandemic period, the sector faced both new opportunities and new challenges. We decided to build on the long term and started with a detailed, harsh, but realistic analysis of all companies in which we were the main shareholder. We have the mission to provide these companies with a clear vision for the future, the right management that can understand and embrace the goals we set together, and access to the necessary funding. The final strategy is yet to be defined, but meanwhile, we’ve supported some important investments, such as over EUR 1 million’s worth of upgrades for some of the hotels on the Black Sea riviera or the project to rebuild the 1 Mai aqua park in Baile Felix, where the investment will total more than EUR 10 million.
What are some of the core priorities in your business?
Our business strategy is built on 5 pillars that will help us consolidate our position as one of the largest investment funds in Romania. On the tourism side, we focus on increasing the profitability of all the companies we own. For the investments we have in real estate and industrial assets, we are actively looking for new opportunities that will allow us to maximise our participation. Private equity and venture capital are still new areas in our portfolio, and we’re approaching them with an open mind.
What are your investment strategies in the private equity and venture capital segments and what kind of companies are you looking to add to your portfolio?
We are ready to support smart, fresh business ideas from all areas of entrepreneurship, and we do not want to limit ourselves to a certain niche. Naturally, tech is the most promising area; we’ve started talks with many IT entrepreneurs and we will continue on this path. KFactory, the industry automation platform, is one of the projects that we’ve invested in, as we see a lot of potential in their plans to support manufacturing companies in Romania in their digitalization processes. Renewable energy is also a sector of high interest for our portfolio companies, as it aligns not only with our sustainable investment approach but also with their goal of becoming more environmentally friendly. We’re looking for opportunities and we are ready to bring funding and expertise to Romanian entrepreneurs. At the same time, our company aims to gradually include ESG factors in its preliminary investment analyses.
A new face for Venus Aquapark
Venus Aquapark, an open-air bath located in the west of Romania, will get a major upgrade in the coming year. It is the largest in the 1 Mai resort, which is well-known for its unique thermal springs. Turism Felix, the company that manages the site and is part of the Transilvania Investments portfolio, has accessed an EUR 8 million loan that will finance the transformation of the aquapark into a major attraction for tourists.
New pools, restaurants, sport fields, and spa facilities will be added, with the aim of preparing the aquapark for a well-deserved restart in the spring of 2023. The investment has huge potential for the whole area, with economic and social benefits for the whole community, which has traditionally been involved in tourism activities.
What is your outlook for the economy in the second semester of 2022 and what impact will it have on the capital market?
The main challenge in the second part of 2022 will be the price of energy—be it gas, oil or electricity—, which will place continuous pressure on inflation. In the context of the conflict between Ukraine and Russia and the draught across Europe, we are not foreseening any fundamental changes in energy prices. We believe that to be the main threat for the already significant budgetary constraints of European countries, potentially leading to additional taxes in the energy sector (e.g. windfall tax).
All that being said, the probability of Europe experiencing a recession is increasing, with potential related threats on the capital market in terms of companies’ ability to maintain their revenue levels. On the Fixed Income side, the Finance Ministry—in its search for additional financing—will most likely be forced to accept higher yields in order to accommodate the spending level.