Bairaha Farms to lend Rs 400 m to Fortune Agri

Bairaha Farms has resolved to furnish a Corporate Guarantee to MCB Bank for Rs 400 million on behalf of Fortune Agro Industries (Pvt) Ltd.

Fortune Agri Industries (Pvt) Ltd is a joint venture company in which Bairaha Farms PLC holds 50% of the issued shares. The transaction is a corporate guarantee amounting Rs 400 million for the working capital requirement of Fortune Agri Industries Ltd. Since Fortune Agri Industries is a joint venture company both the joint venture partners are equally contributing by issuing corporate guarantees worth of Rs 400 million each.

(IH)
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First Capital Treasuries debentures rated [SL]BBB+

ICRA Lanka Limited, a wholly owned subsidiary of ICRA Ltd, has assigned the Issuer rating of [SL]A- (pronounced SL A minus) with a stable outlook to First Capital Treasuries Limited.

ICRA Lanka has also assigned the [SL]BBB+ rating with stable outlook to the Rs 500 m Subordinated Unsecured redeemable Debenture programme of the company.

The ratings factor in FCTL's position as an established Standalone Primary Dealer in Sri Lanka with a long track record, established franchise and clientele. The rating also factors in the prudent internal control and processes, along with the adequate risk management systems put in place, which is commensurate in relation to the risks intrinsic to a Primary Dealer's business.
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ICRA assigns [SL]A- rating to First Capital Holdings

ICRA Lanka has assigned the [SL]A- rating to the Rs 500 m Senior Unsecured Redeemable Debenture programme of the company. ICRA Lanka has assigned the [SL]A2+ rating to the Rs 1,000 m Commercial Paper programme of FCH.

ICRA Lanka has taken a consolidated view of FCH and its subsidiaries due to their common brand and senior management team and, other operational and financial linkages between the group entities.

The ratings factor in the FCH’s status as the holding company of First Capital Treasuries Limited. The ratings take note of the improvement in the business and financial performances of the other group entities, which are engaged in corporate debt structuring, corporate finance, asset management, stock broking and in extending margin trading facilities, over the recent past.

ICRA Lanka however notes that FCH’s performance is largely dependent on performance of FCTL, as the contribution from the other entities presently is quite modest. FCTL accounted for about 80% of the total consolidated asset base of FCH and about 70% of its consolidated profit before tax for FY2015.

FCH’s performance is expected to be susceptible to the risks inherent in the primary dealer business. The above mentioned risk however is likely to be moderated by the prudent internal control and processes, along with the adequate risk management systems put in place for FCTL.

The FCH group has an established clientele of over 2500, which is expected to support the business growth of the other group entities. ICRA Lanka takes cognisance of the comfortable liquidity position of the FCH group given the highly liquid assets and the sanctioned credit facilities from banks with the group entities.
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Mixed sentiments over CBSL vehicle leasing directive

Shirajiv Sirimane and Fizel Jabir (business@dailynews.lk)

Mixed sentiments have been expressed by the motor industry with regard to Central Bank’s decision to introduce an upper limit of 70% on the price of a vehicle that can be financed by non-bank lenders.

The decision applies to all types of vehicles including motor bicycles and three wheelers.

Vehicle Importers Association of Sri Lanka (VIAL) Secretary Keethi Gunawardena said the Central Bank’s decision to bar commercial banks and finance companies granting loans and leases in excess of 70 percent on the vehicle value will have an adverse effect on the vehicle market in a backdrop of the rupee depreciating in an unprecedented manner.

He said with the US Dollar and the JapaneseYen appreciating, the prices of vehicles have already shot up by Rs125,000 to 550,000.

In such a context the Association is very much concerned about the move to impose a taboo on granting loans and finances with regard to vehicle purchase, he said.

Gunawardena said this move will very negatively affect people who have newly embarked on a career and were looking at purchasing their first car as they don’t have cash reserves. VIAL is therefore very concerned above this move, Gunawardena added.

The Central Bank directed finance companies not to give any vehicle loan amounting to more than 70 percent of (loan to value ratio) of the price of a vehicle from September 15.

Automotive Valuers Association of Lanka Secretary and CareDrive Motor Engineers Managing Director Isuru Senaratne said that this has both negative and positive sentiments. “Firstly as expected this will reduce the import of vehicles and leading to the balance of payments crisis and towards the stabilization of the rupee triggered by high imports.”

He said that this may not have a big impact for banks involved in leasing. “However it would definitely have an impact on the leasing companies as they usually provide almost 99% of a value of a vehicle to a customer as against the bank’s 70%.”

This will increase cash flow due to the 30% contribution from the buyer for the purchasing price. “Finance companies’ business strategy is to go for high exposure against the market value justifying credibility of a potential customer.”

“What will happen is that people will opt for small cars (less than Rs. 2 million). In addition people will also go for personal loans.

An official from a leading finance company said that today over 60% of vehicles are sold on lease. “This will definitely have a negative impact on our bottom line.”

An official from the Central Bank said that the idea was to have stable market in the industry where defaulters will minimize to a greater extent.
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Sri Lankan rupee at record low on importer dollar demand

Reuters: The Sri Lankan rupee weakened 0.3 percent on Tuesday, hitting a record low for a third session in a row due to importer dollar demand, although some exporter conversions of dollars capped the fall, dealers said.

The spot rupee ended at 140.25/35 per dollar, compared with Monday's close of 139.85/95.

It fell 0.5 percent to hit an all-time low of 140.00 per dollar in early trade on Monday before regaining some of the losses after a state bank sold dollars to arrest the fall.

"The rupee will slide till substantial inflows come in," a currency dealer said, asking not to be identified.

The market expects the currency to fall further in the short term if the central bank fails to tighten interest rates or the country does not see strong inflows soon.

Some dealers said imports of vehicles might slow down ahead of the government budget scheduled for November, but imports of fast-moving goods would continue as usual.

Finance minister Ravi Karunanayake said last week that the rupee will be brought to an acceptable level before too long and interest rates, which have been on a rising trend, will be pushed down. 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)

HNB signs deal with DEG for $ 35 m loan

HNB PLC last week entered into an agreement with the German Development Finance Institution DEG – Deutsche Investitions-und Entwicklu-ngsgesellschaftmbHto raise $ 35 million through a six-year senior long-term loan.

The funds raised would be utilised to finance the growth in the SME sector. The agreement is the second between HNB and DEG to raise capital. HNB in 2012 obtained an eight-year subordinated loan of $ 25 m for the same purpose of funding SME sector growth.

This transaction is the second long-term loan transaction signed by the bank with a prestigious international financial institution during 2015, the first being a $ 100 m loan with ADB signed in March this year for funding infrastructure development in Sri Lanka.

The agreement was signed on behalf of HNB by MD/CEO Jonathan Alles and Director Rose Cooray while Director Dr. Andreas Zeisler and Vice President Marina Dietz of DEG respectively signed the agreement on behalf of DEG.

Commenting at the signing, Alles stated: “HNB is delighted to enter into a second capital raising agreement with a financial institution of the stature of DEG. The funds raised will enable HNB to positively impact the entire eco system via the infusion of capital into the country’s engine of growth, the SME sector. The long term partnership of DEG with HNB for SME funding is a testimony of the bank’s ability to leverage on it 250 branch network in supporting a large number of SME customers spread across the country.”

He further stated: “HNB’s ability to raise finance internationally is a direct endorsement of HNB’s robust business model, growth trajectory and well capitalised balance sheet.”

“HNB and DEG have been partners for more than three years now. We are proud to announce a further long-term financing for our valued partner, earmarked for its business operations with SME clients. In doing so, we contribute to strengthening the financial sector in Sri Lanka and to creating and safeguarding jobs,” said Andreas Zeisler, Director Financial Institutions Europe/Asia, DEG.

He further stated: “SMEs have critical importance to the national economy. With its wide network, a comprehensive product range and solid expertise HNB has proactively positioned itself as a strong partner for SMEs.”

DEG, a subsidiary of Germany’s KFW, is one of the largest European development finance institutions for long-term project and company financing. For more than 50 years, DEG has been financing and structuring the investments of private companies in developing and emerging economies.

DEG invests in profitable projects that contribute to sustainable development in all sectors of the economy, from agriculture to infrastructure and manufacturing to services. It also focuses on investments in the financial sector in order to facilitate reliable access to capital locally. DEG’s aim is to establish and expand private enterprise structures in developing and transition countries, and thus create the basis for sustainable growth and a lasting improvement in the living conditions of the local population.

HNB is a premier private sector bank in Sri Lanka and has been recognised by prestigious international and local bodies for excellence in multiple disciplines. HNB in 2015 was the recipient of the ‘Best Retail Bank of 2014’ award at the Asian Banker’s ‘Excellence in Retail Financial Services Awards’ and won the Gold Award in the Banking Category at the 11th ‘ACCA Sri Lanka Sustainability Reporting Awards’.

HNB is the first Sri Lankan bank to obtain an international credit rating via being assigned a foreign currency issuer rating of B1 on par with the sovereign rating by Moody’s Investors Service, while having a national long term rating of AA- (lka) by Fitch Ratings (Lanka) Ltd.
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Sri Lankan shares edge down in dull trade

Reuters: Sri Lankan shares edged down on Tuesday led by losses in diversified shares as investors turned cautious amid a weakening rupee and high interest rates.

The main stock index ended down 0.14 percent at 7,152.43.

Turnover stood at 613.5 million rupees ($4.39 million), well below this year's daily average of 1.13 billion rupees. The turnover has been about half of this year's daily average since Aug. 31, the bourse data showed.

"Investors are waiting to see how the government is going to bridge the budget deficit and where the revenue is going to come. That is the single biggest thing they are waiting to see," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd.

A weak rupee curbed investor risk appetite and rising market interest rates also hit sentiment, with T-bill yields at their highest in more than five months at the last auction.

The rupee fell 0.3 percent on Tuesday, hitting a record low for a third session in a row due to importer dollar demand.

Foreign investors were sellers of 11.8 million rupees worth shares on Tuesday extending the year-to-date net foreign selling to 3.02 billion rupees worth of equities.

Shares in Carson Cumberbatch Plc fell 1.25 percent while Dialog Axiata Plc fell 0.88 percent. 

($1 = 139.8000 Sri Lankan rupees) 

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