First Capital Holdings PLC reports significant growth for the first half of the financial year 2014/2015

Key Highlights
* Consolidated Group turnover of Rs. 1.7Bn for the first half of the financial year 2014/15

* The consolidated profit after tax of the Group has increased to Rs. 868Mn, compared to Rs. 95Mn, reported in the corresponding period of the previous year

* Favourable macro-economic condition provided opportunities for growth in the market

* First Capital Treasuries, is the leading non-bank Primary Dealer appointed by Central Bank

* First Capital Wealth Fund, currently best performing fixed income Unit Trust

* Milestones during the period under review include landmark AAA rated debenture, first ever Micro Finance backed securitization and launch of new funds

First Capital Holdings PLC reported a consolidated turnover of Rs. 1.7Bn for the first half of the financial year 2014/15while consolidated profit after tax of the Group has increased to Rs. 868Mn, compared to Rs. 95Mn, reported in the corresponding period of the previous year. The consolidated turnover for the period under review is in comparison to Rs. 910Mn for the same period last year.

The group’s primary dealer arm, First Capital Treasuries Limited, was a notable contributor towards the financial results for the period under review.

"Favourable macro-economic factors such as a decline in secondary market interest rates, high market liquidity and low inflation created significant opportunities for growth in the market. First Capital Treasuries, which is currently the leading non-bank Primary Dealer appointed by Central Bank, was able to analyse yield curve movements and earn exceptional returns through anincisive combination of trading expertise and extensive research," elaborated Dilshan Wirasekara, CEO of First Capital Holdings PLC.

First Capital Limited, which specialises in structuring and placement of corporate debt securities, successfully raised funds over Rs. 7Bn through listed debentures, asset backed securitizations and other corporate debt securities. Meanwhile during the first half of the financial year 2014/15, the group’s Wealth Management and Unit Trust, First Capital Asset Management Limited, displayed a 200% increase over the previous year-end.

The division’s total assets under management surpassed Rs. 3.2Bn during the period. With a return of 25.23%p.a. over the 12 months ended September 2014, First Capital Wealth Fund continued to steadily outperform the market during the six months under review maintaining its position as the best performing fixed income unit trust. Consistent with a surge in the performance of the Colombo Stock Market, First Capital Equities (Private) Limited, the stock broking arm of the group, also contributed positively to the Group results.

"We are pleased with our performance to date but expect profits from the primary dealer arm to be more modest during the second half of the financial year. With interest rates currently at historical lows, the opportunities for exceptional gains are limited and our focus will be on managing risk and maintaining acceptable income levels. The Group will continue to build on the current growth momentum across all its subsidiary businesses while expanding on corporate advisory and broader investment banking services," said Wirasekara, highlighting the Group’s vision of becoming Sri Lanka’s leading investment bank and its performance thus far.

During the period under review, First Capital Asset Management also extended its range of products by launching three new funds - First Capital Fixed Income Fund, First Capital Gilt Edged Fund and First Capital Money Market Fund. With renewed interest in the Unit Trust industry, First Capital Asset Management also conducted multiple investor awareness programs around the island in order to facilitate knowledge sharing and support the development of the industry.

First Capital Holdings PLC comprises of First Capital Treasuries Limited, First Capital Asset Management Limited, First Capital Equities (Private) Limited, First Capital Markets Limited and First Capital Limited.

The company’s Board of Directors comprises of Ms. Manjula Mathews - Executive Chairperson, Dinesh Schaffter - Managing Director, Nihara E. Rodrigo, Eardley Perera, Ms. Minette Perera, Nishan Fernando and Chandana de Silva as Independent Directors.
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Smaller shareholders get windfall from mandatory offer for UBC

Many bigger shareholders including chairman didn’t accept

Smaller shareholders of Union Bank of Colombo PLC (UBC) got a windfall from the mandatory offer of Rs. 25 per share offered for a small fraction of their holding finding that up to 10,000 of their shares would be taken at the 25-rupee price.

Those who had more had the benefit of 16.01% of the excess also accepted.

This was possible as many of the big shareholders, including Mr. Alexis Indrajit Lovell, Chairman of UBC owning 6.51 percent of the bank, had not accepted the offer.

Lovell had entered into an agreement with Culture Financial Holdings Ltd. (CFHL), now controlling UBC, that he will not divest his UBC shares for an agreed (but undisclosed) period of time, thereby effectively undertaking not to accept the mandatory offer to the minority shareholders of the bank, a circular to UBC shareholders revealed.

But many other bigger shareholders too had not accepted the offer making it possible for the offeror to take much more than the 6.25% of the individual shareholdings for which the offer was made.

According to a Stock Exchange filing, 271 shareholders had offered 8.58 million shares on the 6.25% percent basis of the offer while 245 had tendered 78.1 million shares in excess of this percentage hoping that get a part of the additional slack available from non-acceptance.

In the event they got much more than they had anticipated thanks to some of the bigger shareholders, with no agreement like Lovell, opting not to accept.

``Unfortunately some shareholders who would have gladly surrendered 10,000 shares at the Rs. 25 price didn’t submit acceptances thinking that just a small fraction of their holdings would be taken,’’ a broker said.

CFHL is a 100% subsidiary of TPG Asia VI SF Pte. Ltd. (Singapore) recently took control of UBC by acquiring 742.16 million shares through a private placement of shares at a price of Rs. 15.30 per share.

PricewaterhouseCoopers (Pvt) Limited had expressed the view that the offer of Rs.25 per UBC Share by CFHL is fair and reasonable to ordinary shareholders of the bank.

CFHL, currently owning 68% of UBC, has offered to purchase up to 2% of the enlarged share capital amounting to 6.25% of shares held by every shareholder of UBC excluding the offeror.

Under conditions of approval given by the Central Bank, it can only acquire 70% of UBC and therefore only acquire 2% of the issued shares of 21.8% of the shares not already owned by them.

Pricewaterhouse has noted that between September 1, 2013 and September 29, 2014 UBC traded at a low of Rs.15.20 and a high of Rs.23.80. They have noted that the highest traded price was still lower than the Rs.25 offer price.

"The weighted average price for the 6-month period up to 29 September 2014 was Rs.21.61 and the Offer Price of Rs.25 per share of UBC represent a premium of 15.7% to the weighted average price per share of UBC," Pricewaterhouse has noted.

Based on the net asset value, the UBC share was worth Rs.13.30 and the Rs.25 offer price represented a premium of 87.9% to the net asset value, they said.

"Based on the market based Price-to-Book multiple approach value for UBC of Rs.15.09 per share, the Offer Price of Rs.25 per share of UBC represents a premium of 65.7%," they have noted.

UBC has two subsidiaries, UB Finance Co. Ltd. in which UBC holds 66.17% and National Asset Management Ltd. in which UBC holds 51%.

As at August 15, 2014, there were six entities and individuals holdings more than 5% of UBC. They are Vista Knowledge Pte Ltd (18.52%), Sampath Bank PLC (7.534%), Associated Electrical Corporation Ltd (7.47%), Select Gain Limited (6.70%), Mr. Alexis Indrajit Lovell (6.51%) and Mr. C.P.A. Wijeyesekera (5.30%).

CFHL has said that its strategic and operational objective is to grow UBC to be among the top five listed licensed commercial banks in terms of assets in line with the Central Bank’s policy initiative to create a well capitalized and larger banking sector to support long-term sustainable growth.

The offer says these investments will strengthen UBC’s capitalization ensuring the bank will satisfy the increased capital requirement of the Central Bank and contribute to the overall stability of the country’s financial sector.

They also plan to introduce an Employees Stock Option Plan (ESOP) conferring relevant employees with the right to subscribe up to 5% of the issued share capital of UBC.

"UBC believes that the combination of capital, operational and strategic measures will lead to significant value generation in the bank over the course of the coming years and the bank will be adequately positioned for growth in the medium term.

"In the short term the investment would enable the bank to reduce the cost of funds and strengthen the financial stability of its subsidiary operations.

"Increased economic activity and uptake of credit demand is expected to drive medium term growth and provide the opportunity to leverage the bank’s strengthened balance sheet following the capital injection by the Offeror," the document circularized to shareholders said.
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Overseas Realty nine-month profit up 28% to Rs. 2.4 bn.

High occupancy at World Trade Center, 95% of condos pre-sold

High occupancy levels at the World Trade Center (WTC) and sale of luxury apartments at Havelock City has driven profits of the Overseas Realty (Ceylon) PLC group, including fair value gains 28% from the comparative period last year in the first nine months of the current financial year to Rs. 2.4 billion, the company announced.

The group maintained growth momentum to achieve revenue of Rs4.7 bn., up 41% through property leasing, trading and services, the company said.

Property leasing revenue climbed 12% to Rs1.3 bn. over the corresponding period with occupancy level at WTC being maintained well above 98%. The revenue recognized from property trading increased by 56% to Rs3.3 bn for the nine months. Tighter control of operating and administration expenses also contributed to the increased profitability, a news release said.

The Group Net Asset Value per share at end September 2014 increased by 4% to Rs 29.76 and the Earnings per Share for the nine months stood at Rs 2.58 rising 23% YoY.

ORCL expects to maintain high occupancy levels rest of the year at WTC and continue its robust sale of apartments. The Havelock City Phase 2 Residential Development has achieved full construction completion as at end September 2014 and pre-sold over 95% of the condominium units.
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MI reduces both size & interest rate of its debenture issue

Mercantile Investments & Finance PLC (MI), one of the country’s stronger finance companies, whose Rs. 200 million listed debenture issue opens on Oct. 30 has reduced both the value of the issue as well as the interest rate payable between April and June this year, its prospectus reveals.

The company originally intended offering Rs. 500 million worth of four-year debentures at 11% per annum with a board decision to this effect on April 30, 2014, and Central Bank approval was obtained.

But on June 30, 2014, the board decided that only two million debentures of Rs. 100 each will be issued to raise Rs. 200 million and the interest rate was reduced to 10.5%, the prospectus said.

Analysts said that since corporate listed debentures are tax free, they are particularly advantageous to companies who have otherwise to pay 27% on their interest income as taxes.

"That’s why nearly all these debenture issues are being snapped up on the opening day itself," an analyst explained. "Even issuers without strong fundamentals have no difficulty marketing their debentures."

Several of these issues have been concluded but there is very little trading with investors holding them to maturity and receiving interest, sometimes quarterly, half-yearly or most commonly annually.

Mercantile Investments & Finance is a closely held company founded over 50 years ago by Mr. George Ondaatjie and is largely owned by his family.

Analysts said that MI has a substantial deposit base with funds mobilized generally at a rate above the 10.5% offered for the debentures.

"With interest rates falling, it is natural that listed corporate debentures will be offered at lower interest,’’ an analyst said. ``MI probably does not need Rs. 500 million now and possibly prefer to watch how the interest rates behave before offering a further tranche.’’
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Muthoot Finance acquires controlling stake of Asia Asset Finance

Muthoot Finance Ltd., one of the largest gold financing companies operating on a global scale whose Head Office is based in Kerala, India, made its first investment in the Sri Lankan market with the acquisition of controlling stake of Asia Asset Finance PLC, widely known as one of the oldest finance companies in Sri Lanka.

In August, Muthoot acquired 29.98% equity stake in Asia Asset Finance for US$ 2.1 million from Asia Capital PLC, a significant shareholder of Asia Asset Finance, through a Colombo Stock Exchange (CSE) transaction.

It has now acquired over 240 million more equity shares in Asia Asset Finance at a price of Rs. 1.60 per share for LKR 384 million as part of a Rights Issue. With this, the total shareholding of Muthoot in Asia Asset Finance has risen to 44.32%.

Muthoot Finance currently operates through over 4,400 branches in India, offering services in gold loans, money transfers, wealth management services, foreign exchange and many other diversified services such as travel and tourism. With strong investments in the UK, US, and the UAE, the company now believes that the economy of Sri Lanka is primed for investment by its stability and strategic positioning.

After the successful completion of the Rights Issue, Muthoot Finance is now the major shareholder of Asia Asset Finance, primarily offering finance services for personal and corporate requirements. The company has a widespread branch network throughout the country in Colombo, Negombo, Gampaha, Wennappuwa, Batticaloa, Jaffna, Kilinochchi, Moratuwa, Kalutara, Kurunegala and Galle.

Speaking on the acquisition, Rajiv Gunawardena, Chief Executive Officer of Asia Asset Finance stated, "The management of Asia Asset Finance strongly believes that the relationship formed with Muthoot Finance will take the company to greater heights and help achieve new milestones. We are pleased with the strategies discussed with Muthoot Finance and plans are already in the making to make Asia Asset Finance one of the Top Finance Companies in Sri Lanka."

"As a pioneering finance company, already well-established in the Sri Lankan Market, Asia Asset is on an upward trend that can only profit further with the added expertise and synergies of Muthoot Finance, which has over 125 years of experience and knowledge in the industry," Gunawardena said.

He said that with the combination of these resources, the company expects to expand the branch network and products within the course of the coming year.

Commenting on the recent success of the rights issue, Roshan De Silva Gunasekara, General Manager of Asia Asset Finance stated, "The success of the takeover is clearly indicated by the fully subscription of the rights issue, we believe that the performances of the next six months will be further improved with the strength and synergies of the new shareholders."

"Asia Asset Finance is also geared to enhance the company’s operating activities by using the latest technologies available to introduce more innovative products and create better synergies within the organization. Thus, we believe that our shareholder investor confidence will be justified with the performance and with the future activities of the company," he added.

He said that the former major shareholder, Asia Capital, also continues to have a strategic position in Asia Asset Finance, believing in the strengths and the future performance of the company.

With its beginnings in 1887 in India, Muthoot Finance has the world’s biggest gold reserve and is India’s largest gold financing company. The company has succeeded in establishing itself as a vast conglomerate that provides specialized services in 16 diverse fields such as Finance, Leisure and Tourism, Education, Healthcare and many others.

Muthoot Finance has over 6 million loan accounts in its loan portfolio and serves 80,000 customers daily. The company has deployed 25,000 people in over 4,400 branches spread over 21 states and four Union Territories across India. The company’s fame is further enhanced by its love for sports, which was clearly indicated by its sponsorship of the Indian Premier League (IPL) series.
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Sri Lanka’s car, van prices tumble through Budget 2015

The customs duty on motorcars would decrease by around 20 to 25 per cent and on vans by around 25 to 65 percent due to the new tax amendments imposed through the 2015 Budget proposals, says the Deputy Secretary to the Finance Ministry.

Finance Ministry Deputy Secretary S.R. Attygalle told adaderanabiz.lk that these Budget proposals would be effective from midnight today (24 October) and that the prices of motorcars and vans would definitely decrease.

“A special tax has been introduced through this Budget which includes all the duties in the import of motorcars and vans. Hence, the prices of these vehicles would definitely decrease,” says Mr. Attygalle.

According to this new tax amendment, the 202 per cent duty on the import of motorcars below 1000 cc engine capacity has been reduced to 173 per cent.

Accordingly, the import duty on small motorcars would decrees by around 29 per cent.

Where vans are concerned, the 175 per cent duty on cargo vans and the 126 per cent duty on 13 to 20 seater vans have been slashed by 100 per cent.
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Everybody gets a raise!

* Rs.15,000 thumping minimum wage hike for public servants

* Pension payments to be adjusted based on new Jan. 2015 salary structure

* Water bills slashed by 10%

* Mahapola scholarship up from Rs. 2,500 to Rs. 4,000

* Sandasen Marasinghe, Irangika Range and Disna Mudalige

President Mahinda Rajapaksa yesterday presented a historic people-friendly development oriented Budget 2015 unveiling proposals that brought relief to all folk, the highlight of which was a wage increase ranging from Rs. 3,500 to Rs. 15,000 making the lowest rank employee of the public service receive a minimum monthly income of Rs. 30,000. The minimum basic salary of a public servant will be raised to Rs.15,000.

President Rajapaksa yesterday presented his 10th consecutive budget in his capacity as the Finance and Planning Minister. Presenting the budget, he said that this budget within the period 2015-2017 will lay the foundation to enable our people to reach a per capita income of US dollars 7,500 by 2020.

The maximum PAYE Tax rate has been fixed at 16 percent to ease the burden of wage earning employees and professionals and to reduce the Value Added Tax to 11 percent.

The President also proposed to place pensioners' emoluments based not on the 2006 salary as was requested, but on the proposed 2015 salary structure to permanently correct the inherent anomalies affecting pensioners when salaries of public servants are revised.

All pension payments will be adjusted in accordance with the 2015 new salary structure.

The government will reduce the domestic water bills by 10 percent. The budget also proposed to introduce a pension scheme for apparel sector employees and Sri Lankans employed abroad and a pension scheme and an insurance scheme for three wheeler drivers.

The budget also proposed to extend the insurance scheme introduced in 2013 to compensate loss to human life and property and to cover crop damage from elephants as well, from 2015.

The President proposed to increase the Mahapola Scholarship for undergraduates from Rs. 2,500 to Rs. 4,000 by January next year.

It is also proposed to increase the Samurdhi allowance to Rs. 3,000 for a four member family and Rs. 2,000 for a three member family.

Parents whose children are serving in the military and Police are to be paid Rs. 1,000 monthly with effect from January.

Proposals were also made to increase the minimum salary of a private sector employee to Rs. 10,000 by 2015 and a Rs. 500 allowance to be added each month and the EPF payment of the employer to be increased upto 14%.

The President also proposed to recruit 50,000 teacher assistants to rural schools next year, while another 50,000 youth will be recruited as trainees next year to fill the vacancies in particular in the provincial and rural centric services as a large number of retirements are being experienced.

It was also proposed to grant a non-resident living allowance to any Police officer who is attached to a Police Station outside his residential districts if the Police station has no sufficient residential facilities. Police Constables and Sergeants will be given motorcycles at a concessional price of Rs. 50,000. Teachers and postmen too would be given motorcycles at a concessional price of Rs 50,000. He also proposed to increase foreign training facilities for Tri services and implement a new salary and allowance structure from January next year.

The Budget also proposed to offer a 12 percent annual interest rate for deposits of pensioners and elders.

It was proposed to increase the price of paddy to Rs. 40 from Rs. 34 while providing seed paddy free of charge to the farmers. The fertilizer subsidy of Rs. 350 will continue while a Rs. 3,000 allowance will be granted to the people suffering from kidney disease in certain districts.

The President also requested the TNA to join hands with government programs to serve all the people of this country alike.
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