LOLC Finance goes for Rs. 5.88 b Rights to merge with group microcredit arm

LOLC Finance has received approval from the Central Bank to acquire 100% of LOLC Micro Credit Ltd., and to merge the two entities as part of consolidation with a move to enhance capital via a Rs. 5.88 b Rights Issue.

Post-merger, LOLC’s finance directors expect significant growth in assets as the synergies are expected to unlock new market opportunities. LOMC is 80%-owned by Lanka Orix Leasing Company Plc and 20% by FMO (Nederlandse Financierings - Maatschappij Voor Ontwikkerlingslanden NV). LOLC is the controlling shareholder of LOFC.

The increase in the asset base immediate upon the merger and the subsequent expected business growth in the merged entity will require additional capital to comply with the capital adequacy requirements stipulated by the Central Bank. For this the LOLC finance directors have approved a Rs. 5.88 billion Rights Issue on the basis of one for two at Rs. 4.20 each involving the issuance of 1.4 billion shares.

The current stated capital of LOLC Finance is Rs. 2 billion represented by 2.8 billion shares. Post-Rights, the stated capital will increase to Rs. 7.88 billion represented by 4.2 billion shares.

Funds raised via Rights Issue will be used to raise additional capital to ensure compliance with the Central Bank Risk Weighted Capital Adequacy Ratio and enhance the Tier 1 Capital base of the company and meet future business growth.

The Rights is subject to regulatory and shareholder approvals.

Net asset per share of LOLC Finance was Rs. 4.21 as of 30 September 2017. It had assets worth Rs. 134.85 billion, up from Rs. 122.6 billion as at 31 March 2017. Liabilities were Rs. 123 billion, up from Rs. 111.6 billion.

In the six months ended 30 September 2017, the total income of LOLC Finance was Rs. 

5.28 billion, up by 23% from a year earlier. After-tax profit was Rs. 620.6 million, down by 13%.

The public shareholding of LOLC Finance is 9.88%, held by 2,615 shareholders.
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