Sri Lanka says China 'port city' broke rules

(Reuters) - Sri Lanka's prime minister said on Wednesday a $1.5 billion luxury real estate deal with China was signed without cabinet approval and without following procedures, and launched a new investigation to uncover any corruption.

The last government entered into the deal with China, dubbed Port City, to build an offshore development on reclaimed land next to Colombo port. Critics say the details of the deal were not revealed and the environmental study not made public.

India has opposed part of the agreement that would give ownership to 20 hectares of land on a freehold basis to a Chinese state-owned company, next to Colombo port which primarily serves India for trans-shipment.

When he was in opposition, Prime Minister Ranil Wickremesinghe said he would scrap the project.

On Wednesday, he said two committees would investigate the deal after the results of an initial investigation showed irregularities, but that the government had not decided to stop the project.

"All the activities of the Port City deal were done without transparency and without following many legal procedures. The agreement was signed without cabinet approval," he told parliament.

"If there was anything against the law while signing the agreement, if there has been any corruption, if there are any conditions detrimental to the country, we will take necessary actions," Wickremesinghe said.

China is keen to ensure the safety of its investments in Sri Lanka. Sri Lanka's foreign minister will visit China next week. Sri Lanka's President Maithripala Sirisena is expected to visit China by the end of March.

A Chinese embassy official in Colombo said China acknowledged the government's decision to investigate.

"But it is an obligation of a democratic government to respect an international bilateral agreement reached with another country by the previous government," the official said.

Wickremesinghe's statement came as Sirisena, who unseated former president and close China ally Mahinda Rajapaksa in Jan. 8 polls, was on a four-day visit to India.

Cabinet Spokesman Rajitha Senaratne said on Feb. 5 the new government would allow the Port City to go ahead. However, Wickremesinghe later said the initial probe was not over.

The port city is planned on 233 hectares of reclaimed land in Colombo. Under the proposed deal, 108 hectares would be taken over by China Communications Construction Co Ltd, including 20 hectares on an outright basis and the rest on a 99-year lease.

The development would include shopping malls, water sports, golf, hotels, apartments and marinas.

(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Frank Jack Daniel)

Sri Lankan stocks recover from over 1-wk low; Dialog Axiata leads

Feb 19 (Reuters) - Sri Lankan stocks edged up on Thursday from their lowest in more than a week, led by Dialog Axiata Plc despite foreign investors exiting some risky assets.

The main stock index, rose 0.54 percent or 39.33 points to 7,306.17, recovering from its lowest close since Feb. 9 hit on Wednesday.

Turnover was at 1.84 billion rupees ($13.85 million), more than this year's daily average of 1.46 billion rupees.

"The market will move sideways until investors see political stability," a stockbroker said on condition of anonymity.

The parliamentary election is expected to be held after April 23 and the new President Maithripala Sirisena's coalition government is still uncertain if it would contest under the same coalition or separately.

Shares in Dialog Axiata Plc rose 2.5 percent a day after the company posted a 11.7 percent rise in fourth-quarter net profit.

Foreign investors sold a net 200.7 million rupees worth of shares on Thursday, but they have been net buyers of 1.32 billion rupees worth of shares so far this year. The bourse saw net foreign inflows of 22.07 billion rupees in 2014. 

($1 = 132.8500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Dunamis PLC records strong growth to post 9-month PAT of Rs. 992.4 m

Dunamis Capital PLC has announced profits after tax of Rs. 992.4 million for the nine months ended 31 December 2014, a more than eight-fold improvement over the corresponding period of last year.

The Group, comprising of First Capital Holdings PLC, Kelsey Developments PLC and Premier Synthetic Leather Manufacturers Ltd., attributed this noteworthy growth principally to the contribution of its financial services unit, First Capital Holdings PLC.

Revenue for the nine months, at Rs. 2.46 billion was up 88%. Gross profit more than quadrupled to Rs. 1.4 billion and was supplemented by other income of Rs. 471 million, 

Dunamis PLC said in its provisional financial statements.

Profit before tax recorded a seven-fold increase to Rs. 1,084 million for the period.

Reviewing these results, the Group’s Executive Chairperson Manjula Mathews said after-tax profits of First Capital Holdings PLC were Rs. 1.09 billion compared with Rs. 263 million in the previous year. “The unit’s primary dealer arm remained the key contributor to profits. The continued decline in secondary market interest rates coupled with favourable macro-economic factors created trading opportunities which yielded exceptional returns,” she said.

Kelsey Developments PLC, the property development arm of the Group reported consolidated after tax losses of Rs. 29 million for the period, compared with profits of Rs. 162 million in the corresponding period of the previous year, in which a one-off capital gain of Rs. 177 million had been realised. “The Company was unable to recognise any of the revenues attributable to its most recent housing development, ‘Templer’s Square’ but had to recognise a substantial part of the overheads due to the revenue recognition policy adopted, which resulted in losses,” Mathews said, but disclosed that Templer’s Square is expected to yield a profit of approximately Rs. 250 million over the next two years.

“Kelsey has also entered into an agreement to purchase land in Negombo for a consideration of Rs. 487 million, on which the Company expects to launch a housing development within the first half of the next financial year,” she added.

The Group’s most recent venture Premier Synthetic Leather Manufacturers Ltd reported operating losses of Rs. 66 million for the first nine months of 2014-15. “Since commencing commercial operations in June 2014 the Company has made steady progress in its sales efforts and we expect it to strengthen its distribution network and become a strong contributor to group profits in the coming years,” Mathews stated.

The Board of Directors of Dunamis Capital PLC comprises of M. Mathews (Executive Chairperson) and Messrs D. Schaffter, N.E. Rodrigo, A.D.E.I. Perera, C.L. de Silva, S. Wickramasuriya and N.C. de Mel.
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Hayleys goes for Rs. 2 b debenture issue

Hayleys Plc announced that it has been granted approval in principle by the Colombo Stock Exchange (CSE) for the listing of Rs. 2 billion worth of debentures.

The senior unsecured listed redeemable rated debentures will be offered for an initial issue of 20 million debentures at a price of Rs. 100 each with the subscription list opening on 26 February.

Capital Alliance Partners Ltd. and Commercial Bank of Ceylon Plc will act as managers to the issue while P.W. Corporate Secretarial Ltd. will serve as registrars to the issue. A prospectus will be delivered to trading members by 16 February. 

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Cargills upbeat after Rs. 2.6b IFC equity boost

By Channa Fernandopulle
Cargills (Ceylon) Plc is looking forward to its next wave of expansion consequent to a capital infusion of Rs. 2.6 billion by the International Finance Corporation (IFC) in exchange for an 8% equity stake in the company’s retail subsidiary, Cargills Foods Ltd.

The investment from IFC – the private sector arm of the World Bank Group – is to be directed towards strengthening the company’s extensive supply chain network and expanding its retail footprint through the opening of new Food City outlets while further investments are expected through the partnership, according to Cargills (Ceylon) Plc 
Deputy Chairman, Ranjit Page.

Cargills upbeat…
“Through this investment we hope to improve our front-end and open new retail outlets while strengthening our supply chain as well. Organised retail still has a lot of potential for development and we hope to be leading player in this process. Already we invest approximately Rs. 1 billion annually into the retail business and these investments will continue as we hope to improve our supply chain further.

“This endorsement of our retail business by an institution of the calibre of IFC is a major positive for our Group. Our business model is driven by the principle of value creation for consumers, producers and communities through sustainable investment and growth across Sri Lanka. When choosing partners or investors, we are very careful to ensure that our philosophy matches that of our investor and that was one of the main reasons we decided to go with IFC,” he explained.

Cargills Foods is the owner and operator of Cargills Food City, Sri Lanka’s largest private supermarket chain. The franchise sources produce from over 10,000 Sri Lankan farmers across the country and employs over 5,000 people, 80% of which are below the age of 25.

Elaborating on the rationale behind IFC’s investment into Cargills, Country Manager for Sri Lanka and the MaldivesAdam Sacknoted that while growth in the organised retail sector enables benefits in terms of job creation and economic growth, it also has the potential to improve the livelihood of agricultural communities across the island while driving raising Government tax revenue.

“Currently we’ve invested approximately $ 600 million into retail around the world and there are a number of reasons why we focus on the retail sector including the fact that it has the potential to create jobs and drive development. Cargills is already a very large contributor to tax revenue and as Cargills grows, the Government can also grow their revenue but another critical factor is that Cargills can contribute to economic growth outside the Western Province.

“Sri Lanka has enjoyed tremendous growth and there has been a strong GDP growth figure but that hasn’t benefited all parts of the country and all communities in the country equally. Through the expansion of Food City, we see many more benefiting, so we hope to contribute to regional growth, especially in terms of supply chains, so it’s not just the shops but the strengthening of supply chains that we see as a critical element to this project,” Sack noted.

He added that the partnership between IFC and Cargills was also expected to expand into other parts of the Cargills business over the long term with discussions to this effect already having been initiated.

“I’ve been in Sri Lanka for a while now and it’s a sophisticated and complex place to live but surprisingly, modern retail is still somewhat underdeveloped. Only 16% of retail goes through the modern trade, whereas in Thailand its 40%, and in China its 60%, so there’s clearly a lot more opportunity to develop the modern trade in Sri Lanka and that’s another reason why we are investing.

“Part of our objective is to support communities and part of it is to support good business opportunities and we’re convinced there is a terrific growth story ahead for what is already one of the leading firms in Sri Lanka,” Sack affirmed.
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