GAAM crosses Rs 5 billion mark in assets under management

Guardian Acuity Asset Management Ltd, which manages three unit trusts, passed an important milestone in its short history when it crossed the Rs 5 billion mark in assets under management (AUM) in early October this year. 

The firm which was recognized as the "Best new asset management company in Sri Lanka 2014" by the prestigious Banking and Finance Review magazine continues to break new ground in 2015 as well.

GoSL to sell $ up to 1.5 B Sovereign Bond

By IsharaGamage

Ceylon Finance Today: The government has approved the launch of a fresh International Sovereign Bond upto the value of US$ 1.5 billion, Central Bank of Sri Lanka (CBSL) sources who didn't want to be named told "Ceylon FT".

"This is a fresh mandate, last week, we have received the Government of Sri Lanka (GoSL) greenlight. We will start our road shows shortly", the sources said. Sri Lanka's foreign reserves as at Wednesday had fallen to US$ 6.6 billion, from a near peak of US$ nine billion in August 2014.

The Sri Lanka rupee is currently under pressure due to foreign debt servicing and import demand.

Citigroup Global Markets Inc., Deutsche Bank, The Hong Kong and Shanghai Banking Corporation Limited and Standard Chartered Bank acted as Joint Lead Managers/Book runners on the transaction, sources said.

Depending on the bids and the yield rates, the maturity period will be decided, the sources said.

CBSL on behalf of GoSL, last May sold a US$ 650 million 10-year International Sovereign Bond at a yield of 6.125 per cent per year.

Fitch Ratings, Moody's Investors Service and Standard and Poor's have rated the Issue at 'BB-', 'B1'and 'B+' respectively. A Sovereign Bond to the value of US$ one billion sold in 2010, matures in 2020.

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Top Sri Lankan property developers promote Colombo projects in China

Sri Lankan property developers ventured into the Chinese market for the first time when some of the country’s most exciting property developments were showcased at the recently concluded Beijing International Property Show.

Indocean Developers, the promoter of ‘Altair’ — the iconic twin tower high rise — and Waterfront Properties (Pvt) Ltd., (A member of the John Keells Group) developer of ‘Cinnamon Life’ represented the sector at this show, which featured 360 international stalls of exhibitors from more than 30 countries and averaged 8,000 to 10,000 visitors per day.

"The scale and quality of some of the on-going building projects in Colombo justify looking at property development as a new segment of our export economy, as they have the potential to attract investors from many countries," said Pradeep Moraes, Director of Indocean Developers. "While each project will compete in the market for buyers, there is a strong case for the leading property developers to work together to position and market the sector overseas."

He pointed out that the Beijing International Property Show had attracted exhibitors from countries such as the USA, Canada, Australia, New Zealand, the UK, Spain, Portugal, Germany, Italy, Netherlands, Greece, Korea, Japan, Singapore, Malaysia, Thailand, UAE, Cyprus, Latvia and Bulgaria, all of them seeking buyers from China.

Roshanie Jayasundera Moraes, Chief Marketing Officer of the Property Group of John Keells Land and Executive Vice President John Keells Holdings, added: "Sri Lanka is poised for tremendous growth, and the new property developments in Sri Lanka will set the stage to take the country to the next level. Chinese overseas property investments over the last few years have grown astronomically. We are perfectly positioned along the silk route and will be a strategic hub in Asia. Sri Lankan property developments are still not on the radar among many foreign investors. Therefore the industry as a whole will need to work hard on promoting Sri Lanka as an attractive investment destination." 

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Prime Union Place property up for sale

The directors of Colombo City Holdings PLC, previously Colombo Pharmacy Company PLC, owners of prime Union Place property at the Eye Hospital Junction have decided "in principle" to dispose the land and buildings owned at Union Place, Colombo-2 "subject to obtaining offers from prospective parties," the company said in a Stock Exchange filing on Thursday.

No details of the extent of the land and built up areas were given in the filing which said that the transaction would require shareholder approval. An extraordinary general meeting (EGM) would be summoned once a prospective buyer is identified, the filing signed by Colombo City Holdings Chairman A.G. Weerasinghe said.

The directors of Colombo City Holdings according to its last annual report of the company are Messrs. A.G. Weerasinghe, Rajan Asirwatham, Ruwan Sugathadasa, Ashan Dassanayake and Eric Wickramanayake.

Lanka Ventures posts best performance in 23-year history

Venture capital investments in SL and Bangladesh paying off, weather favourable

Lanka Ventures PLC (LVP), a long established venture capital company controlled by the DFCC Bank and HNB, has posted its best ever result in its 23-year history in the period ended Mar. 31, 2015, achieving the highest income and profit since inception, the company’s chairman, Mr. Jonathan Alles, has said in its annual report.

The LVP portfolio is focused mainly on the power generation sector with ongoing projects both in Sri Lanka and Bangladesh with investments in hydro, thermal and wind power generation.

"This was the first time in its history that a group profit in excess of Rs. 300 million was achieved," Alles said. The group profit after tax was up to Rs. 335 million, more than double the previous year’s Rs. 150 million.

The numbers published for the year review were impressive – total income was up to Rs. 299 million from the previous year’s Rs. 123 million, power generation income was up to Rs. 239 million from Rs. 46 million and share of profits from associates up to Rs. 264 million from Rs. 222 million.

Interest income was down to Rs. 9 million from Rs. 30 million the previous year which Alles attributed to low interest rates and depleted idle funds invested in fixed income securities.

The main reason for the group’s superior performance was the contribution made by a hydro power plant owned by a subsidiary company which performed extremely well under favourable weather conditions, the chairman said.

LVP’s total investment in the energy sector topped two billion rupees as at Mar. 31, 2015. "Our energy sector investment portfolio is well diversified in terms of energy source and geographical location," Alles explained. "The four hydro power plants that are presently in operation recorded exceptional results during the financial year ended Mar. 31, 2015, aided by favourable weather conditions."

The company is also into healthcare with the chairman saying that this exposure, at Rs. 99 million as at balance sheet date, remained small.

"Our investment portfolio expanded by Rs. 208 million during the year with three new investments of which two were made in hydro power projects and one in a thermal power project in Bangladesh," Alles said.

As at Mar. 31, 2015, total investment in Bangladesh, done in partnership with Lakdhanavi, a Lankan company with extensive experience in setting up and operating thermal power plants both here and abroad, stood at over a billion rupees.

Lanka Ventures has a stated capital of Rs. 631.6 million and group retained earnings of Rs. 775.1 million in its books. The company’s retained earnings were Rs. 98.3 million. Total group assets ran at Rs. 3.58 billion and liabilities at Rs. 1.36 billion. At company level these were Rs. 895.6 million and Rs. 165 million.

The main shareholder of LVP is Acuity Partners (Private) Ltd., a joint venture between the DFCC and HNB, owning 79.58% of the company. The second biggest shareholder, Mr. A.M. Weerasinghe, owns 1.04%.

The LVP share traded at a high of Rs. 48.80 and a low of Rs.34 during the year under review against a trading range of Rs. 50 to Rs. 29.20 a year earlier.

The directors of the company are Messrs. Jonathan Alles, Chairman, Arjun Fernando, Sunil de Silva, Tyronne de Silva, Ananda Munasinghe, Ray Abeywardena and Ms. Ruvini Thenabadu, the majority being nominees of DFCC and HNB.
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Singhe Hospital opens laboratory

Singhe Hospital network opened its first complete laboratory at Homagama recently.

The public can now acquire all kinds of laboratory facilities at reasonable prices at the laboratory which is opposite the Homagama Base Hospital.

The laboratory is open around the clock, 365 days of the year.

"A complete and accurate laboratory report will make the doctor's job easy. It is with this in mind that we provide services to customers. Our friendly staff will assure everyone is treated carefully," a laboratory spokesman said.

Managing Director, Singhe Hospital, Navinda Weerasinghe said, This is the first step and we hope to open full-fledged laboratory facilities in other cities as well."

Singhe Hospital (Pvt) Ltd's recent Initial Public Offering was to finance expansion.

"We hope to fulfill our shareholders expectations beyond the set goals," he said.

Chairman, Singhe Hospitals, A. M. Weerasinghe thanked the shareholders for the support they extended.

In just three years, Singhe Hospital has increased its annual revenue to approximately Rs 250 million.

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Total foreign outflows in 3Q15 at Rs. 2.5 bln

The total foreign outflows at the Colombo bourse during the third quarter of the current year stood at Rs. 2,456 million mainly on the back of political uncertainty over the new national government policies along with the lack of clarity on the economic direction, analysts said.

“Heavy foreign exits from both the debt and equity markets resulted in a depreciation of the foreign exchange rate during the quarter. Therefore, during the quarter the local currency depreciated by 6.1 against the US$. We expect this to have an adverse effect on the Balance of Payment (BOP) as the country is more inclined towards imports,” a SC Securities research report said.

It added that pressure was placed on the BOP with high level of vehicle imports reported in July with a 223 per cent year on year (YOY) increase and in August with a 218 per cent YoY increase. The report said that during July total vehicle registrations stood at 61839, which was the second highest month of imports for the year after 66889 vehicle registrations were reported in March. “However, with increased vehicle importation in place, we believe banks with considerable foreign currency reserves (will) post considerable gains. Also good results can be expected from export oriented businesses as well,” the report added.

“Also due to the uncertainty that existed in the global markets with the Chinese government devaluing the Yuan, the Russian ruble weakening, continued geopolitical instability in the Middle East region, sanctions in Iran and uncertainty in the EU region with troubled Greece we expect a contraction in the exports during the quarter,” the report added.

It said that during the three months to July-September end, the All Share Price Index (ASPI) performed reasonably well. The quarter started off with ASPI at 6983 points and reached 7499 points following the end of the election on the 19 August. The quarter ended with the benchmark index failing to 7079 points end September.

The average ASPI during the quarter stood at 7219 points. The ASPI dropped 3.7 per cent year to date at the end of September. Foreigners remained net sellers during July and August with heavy outflows from the bourse with Rs. 2.730 million. However, in September the trend reversed with net inflows of Rs. 274 million as foreigners started to enter the market.

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New rules on vehicle financing will shrink NBFI margins – analysts

New rules on vehicle financing will see the smaller Non Bank Finance Institutions (NBFI)’s in a difficult position to compete with larger NBFIs likely to lose market share to the large commercial banks, analysts say.

“The law of unintended consequences might play out where the smaller NBFIs who do not have a diversified business model and who have higher cost of funds may be forced to consolidate to remain competitive,” Murtaza Jafferjee, CEO JB Stockbrokers says. There have been many measures taken by both the Central Bank (CB) and Ministry of Finance over the last 30 days to curb vehicle imports.

Typically, a leasing company would assess the forced sale value of a vehicle and lend up to 90 per cent of this value. Most leases are for five years comprising equal installments but there are variants such as structuring the monthly payments on 70 per cent of the value of the lease and the residue to be paid at the end, Mr. Jafferjee says. The CB issued a circular effective 15 September 2015 placing a 70 per cent loan value cap with the objective of limiting the amount of credit flowing into vehicle leases aimed at ensuring that this would result in a fewer number of vehicles being financed. Monetary regulators the world over do place caps on lending against asset classes, the most obvious one being on real estate, so what CB did was not extraordinary.

“The media carried a statement made by the finance minister (FM) that the LTV cap would be scrapped since it affects the financing of registered vehicles and instead a 100 per cent LC margin will be imposed (policy measure focused on the supply side). One would presume that the FM’s statement was more a wish or request to CB for the Central Bank comes under the Prime Minister. To my knowledge thus far there has been no revocation of the LTV cap directive and is unlikely to be revoked in the near future.” Mr. Jafferjee explained.

He said that one ideally would want a free market but sometimes it necessitates intervention either in the case of market failure or is overheated (as in this case) but intervention invariably leads to distortion. Some finance companies are making the argument that LTV caps should not applied to registered vehicles for these units are already in the country, this is a deeply flawed logic for product markets are all linked.

Not all buyers of unregistered vehicles are first time buyers, a majority of them would either be replacing a vehicle or upgrading to a higher category thus their affordability is driven by the resale value of their existing unit. “Since the policy measure is to dampen affordability, one cannot only restrict it to unregistered cares for credit flowing to registered vehicles would increase their value which in turn would increase affordability of unregistered cars,” Mr. Jafferjee said further. He said that a serious problem with the LTV rule is that it significantly disrupts the vehicle financing market place.

A firm in this business has four levers to compete with – interest rate on the lease, geographic distribution, sales intensity and taking higher risk by lending to a sub-prime customer – poor credit history or no evidence of formal income or low quality of collateral, Mr. Jafferjee says. “In the case of the latter under the LTV rule the credit cost would come down significantly – the historical loss given default rate for the leasing industry has been around 40 per cent from the point of default based on a LTV rate 90 per cent this would probably decline to less than 10 per cent and the probability of default would also reduce. Thus a strategy based on targeting a riskier segment is not possible; most firms will only be left with three levers – cheaper interest rates, sales intensity or greater distribution reach.” Data showed that brand new car registrations recorded 9,183 units in September significantly up from 5,216 units the prior month and a mere 980 units 12 months ago. This is a 940 per cent increase in 12 months and 76per cent increase over the previous month.

Small cars (1,000cc) accounted for the 8,891 units (97 per cent). Maruti accounted for 7789 units (85 per cent) in September up from 4259 the previous month (83 per cent increase) and mere 564 units 12 months ago (1380 per cent increase). Micro recorded 639 units (mainly panda) up from 441 units the previous month and 152 units 12 months ago. Hyundai recorded 228 units mainly comprising of Eon.

Tata’s Nano Twist is gaining traction but volumes are yet low at 127 units. Financing share recorded 68per cent up from 64per cent the previous month. It’s noteworthy that Maruti Alto Financing share was 68 per cent in September up from 61.7 per cent in Aug in Spite of the 70 per cent loan to value cap coming into effect on 15 September.

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Krrish to break ground for mixed development project soon

By Bandula Sirimanna

Indian real estate company Krrish Group will break ground soon for its long-delayed US$650 million mixed development project at Transworks House in Fort as the company has received the approval of the Urban Development Authority (UDA) last week to go ahead, local Krrish officials revealed.

The local company Krrish Transworks Colombo (Pvt) Ltd, a subsidiary of Indian real estate company Krrish Group, will launch construction of the proposed first and second phases of the project within the next two months, they said.
The company has paid Rs.4.4 billion out of the full lease payment of around Rs.5 billion to take over the 4.3 acre land on 99 year lease.

A sum of Rs.589.7 million with accumulated interest at 12 per cent will have to be paid by Krrish to complete the land deal but there was no clause in the 99 year lease agreement that prevents construction work till the payment of full amount, a top official of the UDA said adding that the local company officials have given an assurance to settle this money.

An international contractor will undertake the building construction and the company will reach an agreement with the foreign developer soon for the mixed development project which would include apartments, commercial space and a hotel, officials disclosed.

A 55-storeyed high-rise tower to house an internationally managed hotel chain with 220 rooms and up market apartments will be built adjoining the Transwork House. Krrish Square will have the base of 10 floor podium for car parking, high end retail stores, shopping complexes etc.

The Krrish project was marred with controversy with the allegation of secret payoffs to keep the window open for payment and for various approvals. Names of several powerful members of the former regime figured in the allegation of secret payoffs by the Krrish Group.

The Krrish group however expressed concern over the bad publicity it had been receiving over the deal including the controversy of a payment delay which it stated was unfounded.

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