DFCC to finance first private grid-connected solar power project

Another first in the renewable energy sector

Recording another first, DFCC Bank PLC, the pioneer in renewable energy financing, will soon add solar energy to its renewable energy portfolio, the bank announced on Friday.

It recently approved a project loan to Saga Solar (Pvt) Ltd; a ground breaking initiative undertaken by a team of investors and backed with the expertise of professionals in the solar energy sector.

"Analyzed and structured by DFCC’s own multifaceted team, this transaction speaks volumes of the Bank’s commitment to develop the renewable energy sector as well play a pivotal role in the economic development of the country," the bank said in a news release.

"Solar energy has been regarded as the green energy category with the highest potential and is expected to form the future of Sri Lanka’s green energy drive. There have been solar applications in the country before on a small scale such as domestic solar PV systems, solar powered drip irrigation, street lamps and electric fences. However, this project will be the first large scale commercial solar project with grid connectivity. The project will add 10 Mw of generating capacity and is located at a 45 acre site in Hambantota."

DFCC Bank has structured the financial solution sought by the borrower and is assisting the project promoter from concept to finish. It is confident that this project will set the stage for other solar energy developers, lending agencies and equity investors to increase their focus on the solar energy sector.

Founded in 1955, DFCC Bank is one of the oldest development banks in Asia, and recently celebrated its Diamond Jubilee. It possesses a proud heritage of achievements, which includes financing new economic sectors in the country and being the wind beneath the wings of many trail-blazing entrepreneurs especially in their early and risky start-up stages. Today these sectors have become mainstream businesses that support the national economy in many ways.

The foray into the renewable energy sector is significant. In 1994, DFCC financed Sri Lanka’s first ever privately owned, grid connected mini-hydro power plant, with both long term debt and equity. It also financed a pioneering manufacturer of turbines for local and foreign hydro power plants. This project was the recipient of ADFIAP’s award for ‘Outstanding Project – Technology Development’. Assistance has also been extended to local hydropower developers to set up projects overseas.

DFCC Bank was also the pioneer financier for private sector wind power projects in the country, when it part-financed the first wind power project in 2010. The bank’s involvement extended beyond mere financing - to facilitating the introduction of a cost-based, technology specific tariff structure. This enabled projects using wind technology to be commercially viable and has spurred development of this form of renewable energy in Sri Lanka.

The success of these pioneering projects has catalyzed the setting up of several other ventures resulting in thriving industries. Today, hydro and wind power combined supplies nearly 10% of the country’s power needs.

DFCC Bank has now merged with its commercial banking subsidiary DFCC Vardhana Bank, and has transformed into a full-service bank. The combined entity offers a breadth of seamless banking solutions which brings together the expertise of a pioneer development bank and the energy of a dynamic commercial bank. Its services are delivered through a network of 137 branches and service points located island-wide, the release said.

www.island.lk

World's largest sovereign wealth fund from Norway invests in Sri Lanka

ECONOMYNEXT - Norges Bank, the world's world's biggest sovereign wealth fund with about a trillion dollars invested in equities, fixed income securities and real estate has started to buy into Colombo-listed companies.

Norges Bank has bought 7.5 million shares in Textured Jersey Lanka Plc, a Colombo-based knit fabric maker with operations in the region, according to data released this week.

The fund started investing in TJL around September and is now the seventh largest shareholder.

Among other firms Norges Bank is believed to be buying into are a bank and a manufacturing outfit.

Norway's Government Investment Fund Global, connected to the country's central bank (Norges Bank) is the world's largest sovereign wealth fund.

It manage oil revenues and invests long term outside the country to keep for a rainy day with 60 percent of the funds in equities. Its largest holding include firms like Nestle, Royal Dutch Shell and Google.

By end September 2015 the fund was valued at 7,019 Norwegian Kroner (1,035 billion US dollars).

High costs, low demand trim Sri Lanka’s Haycarb profits

ECONOMYNEXT – Sri Lankan activated carbon manufacturer Haycarb PLC said September 2015 quarter net profit fell six percent to 122 million rupees from a year ago as raw material costs stayed high and demand depressed.

Sales fell seven percent to 2.6 billion rupees in the quarter, interim accounts filed with the stock exchange showed.

Quarterly earnings per share of the coconut shell-based activated carbon multinational fell to 4.12 rupees from 4.38 rupees the year before.

In the six months ending 30 September 2015, EPS fell to 8.67 rupees from 8.78 rupees the previous year.

Haycarb Managing Director Rajitha Kariyawasan said raw material prices in Sri Lanka stabilized in the first half of the year but were now increasing in India, Sri Lanka and Indonesia.

Haycarb had difficulty in sourcing enough raw material at competitive prices and faced “intense competition” in global markets due to the depressed gold industry and competition from low cost manufacturers from Philippines, India and Indonesia, he said.

It has launched initiatives to strengthen raw material supply chain networks and build partnerships through providing technology and funding of environment friendly charcoaling technology in Sri Lanka and overseas.

Initiatives last year targeting increases in throughput and energy saving impacted the bottom line favourably in the first half of the 2015/16 financial year, he said.

Haycarb said it estimates liability for a new one-off 25 percent Super Gains Tax imposed on firms whose profit exceeded two billion rupees in 2013/14 at 64.9 million rupees for the group.

Bank of Tokyo Mitsubishi gets Central Bank approval to open an office in Sri Lanka

Oct 30, Colombo: The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) announced that it obtained approval from Sri Lanka Thursday to open its first representative office in Colombo.

This is the first approval granted to a Japanese bank by the Central Bank of Sri Lanka, the BTMU said in a release.

BTMU plans to open the new representative office by the end of March 2016, subject to regulatory approval in Japan.

The opening of a BTMU office in Colombo is aimed at facilitating investment by Japanese companies in Sri Lanka, which has been enjoying a high economic growth rate of 6-8% per annum, largely driven by rising demand for infrastructure construction and flourishing tourism.

The Japanese Bank noted that Sri Lanka is located astride the strategic sea lane which connects Asia with the Middle East and Africa.

Currently, there are more than 100 Japanese corporates invested in Sri Lanka, and more investments are expected, the BTMU said.

"Through the new representative office in Colombo, BTMU will continue to further enhance its financial solutions and offerings to better meet the needs of its customers operating in or trading with Sri Lanka by making the most of its extensive network, which is the largest among Japanese banks," the Japanese Bank said.

BTMU has offices in South Asia including five branches in India at Mumbai, New Delhi, Chennai, Bangalore, and Neemrana, at Karachi in Pakistan and a representative office at Dhaka in Bangladesh.

www.colombopage.com

Sri Lanka’s John Keells Hotels profits flat in September quarter

(LBO) – Sri Lankan hotel operator, John Keells Hotels Plc’s profits increased by only 2 percent to 350 million rupees in the September quarter 2015 despite a tourism boom in the Island, interim accounts showed.

Earnings per share was flat at 24 cents per share for the quarter.

The company’s revenue also increased by 2 percent to 2,768 million rupees compared to 2,701 million rupees a year earlier.

The group which has hotels in Maldives said cost of sales rose 4 percent to 910 million rupees and gross profits rose 2 percent to 1,857 million rupees.

Finance costs declined 34 percent to 45 million rupees from 68 million rupees, a year earlier.

Revenues in the Maldives branch rose to 1,441 million rupees in the quarter from 1,463 million rupees a year earlier giving 170 million rupees in profits, down from 223 million rupees.

In Sri Lankan segment, revenues rose to 1,351 million rupees up only 7 percent in the quarter from 1,260 million rupees a year earlier and it made a profit of 181 million rupees, up from 133 million rupees a year earlier.

Sri Lanka inflation accelerates to 1.7-pct in October

ECONOMYNEXT - Sri Lanka's consumer prices rose 1.7 percent in the 12-months to October 2015, up from a negative 0.3 percent last month, ending two months of falling prices.

The widely watched Colombo Consumer Price Index gained 0.7 points to 182.1 points.

The price index which was at 183.2 points in January fell sharply by 2.3 percent in February after the government cut prices of several traded goods including fuel.

Though the index gained steadily since then, except for the last two months, but 12-month inflation was low or negative due to one off effect.

In October food prices rose 0.8 percent but non-foods index was flat.

Sri Lanka rupee also fell sharply over September, but global commodity prices were flat and falling with a strong US dollar. Sri Lanka is facing balance of payments pressure with a recovery in domestic credit, and monetization of debt.

Concerns have been raised over core-inflation, which is made up mostly of non-traded items. Core inflation rose to 4.4 percent from 4.2 percent a month earlier.

Sri Lanka's 5 and 15-yr bond yields fall on auction

ECONOMYNEXT - Sri Lanka sold 10.39 billion rupees of 5 and 10 year bonds Friday with yields plunging after the sovereign bond sale, ahead of a large bond maturity on November 02.

The debt office sold 3.69 billion rupees of 5 year bonds maturing on 01.05.2020 at an average yield of 8.99 percent, sharply down from 9.58 percent at an auction on September 15.

Sri Lanka also sold 6.7 billion rupees of 15-year bond maturing on 15.05.2030 at an average yield of 10.33 percent.

On September 09, similar maturity bond were sold at 10.96 percent.

On November 02, and 70 billion rupees of bonds are coming up for maturity.

On October 26, another 45.4 billion rupees of bonds were rolled over with settlement on November 02, indicating that 55.8 billion rupees of bonds have been rolled over so far.

There are also coupon payments on this maturity and others due on the date. Some of the bonds are held by foreign investors.

Sri Lanka sold a 1.5 billion US dollar sovereign bond this week, which has pushed yields down ahead of any receipts coming to the country. However more debt was monetized at Wednesday's auction with about 12 billion rupees being printed to keep short term gilt yeilds down.

The Central Bank also sold 330 million dollars of floating rate dollar bonds with settlement on October 19, but the proceeds were taken into foreign reserves with domestic liquidity sterilized data showed.

Sri Lanka Mackwoods Energy minihydro power projects still delayed

ECONOMYNEXT – Sri Lankan energy firm Mackwoods Energy said it has clinched a deal to sell electricity from its Tudugala minihydro power plant to the national grid but still faced delays in getting approval for its other projects.

A stock exchange filing said the company recently signed the Standard Power Purchase Agreement with the state utility, Ceylon Electricity Board, for the Tudugala minihydro project for the purchase of power by the grid.

The Tudugalla Mini Hydro Project was to have a capacity of 12 kilowatt. But Mackwoods Energy Chairman Chris Nonis has told shareholders that the Power Purchase Agreement with the CEB was for a lower capacity.

The Mackwoods Energy stock exchange filing said timelines for implementing its remaining minihydro power projects, which are awaiting grid connectivity approval prior to the issue of Letters of Intent, have been extended.

This was owing to delays in the approval process, transmission line and grid availability issues and policy and administrative changes, Mackwoods Energy said.

“The company is making every effort to expedite during the next year the approvals for the remaining minihydro projects, which are a key aspect of its diversification into the renewable energy sector in line with the stated objectives of the company.”

Pending approval of its remaining mini hydros, the company still has to do site inspections, surveys and negotiate with funding agencies and potential investors, the statement said. 

Sri Lanka’s Dipped Products Sept net down 92-pct

ECONOMYNEXT – Sri Lankan rubber gloves manufacturer Dipped Products group said net profit for the September 2015 quarter fell 92 percent to 23 million rupees from a year ago as revenue fell and plantations made a loss.

A stock exchange filing said group sales for the quarter fell 16 percent to 5.3 billion rupees from the year before.

Earnings per share for the quarter fell to 38 cents from 4.93 rupees the year before. EPS for the six months ended 30 September 2015 fell to 2.57 rupees from 8.79 rupees the year before.

Interim accounts showed sales fell in the firm’s gloves and plantations businesses with profits from gloves falling by more than half and plantations slipping into a loss of 32 million rupees.

Dipped Products said in a statement its plantations business suffered losses of 117 million rupees in the six months period.

“The plantation sector was impacted by lower prices both in rubber and tea,” said the company which claims a five percent share of the global non-medical rubber glove market. 

Sri Lankan shares down on foreign selling; block deals boost turnover

Reuters: Sri Lankan stocks ended lower for a second straight session on Friday as foreign investors sold shares in conglomerate John Keells Holdings Plc amid uncertainty after the U.S. Federal Reserve revived expectations it may raise interest rates by year-end.

Turnover, however, was boosted to a more than two-month high due to block deals in John Keells Holdings, Commercial Bank of Ceylon Plc, Distillers Sri Lanka Plc, Hatton National Bank Plc and Vidullanka Plc.

Foreign investors were net sellers of 257.5 million rupees ($1.83 million) worth of shares on Friday, extending the year-to-date net foreign outflow to 3.7 billion rupees.

The main stock index ended down 0.4 percent or 28.07 points weaker at 7,042.06, further moving away from its highest close since Oct. 12 hit on Wednesday.

The day's turnover was 1.93 billion rupees ($13.70 million), the highest since Aug. 26 and well above this year's daily average of 1.1 billion rupees.

Shares in conglomerate John Keells Holdings Plc fell 2.51 percent while Dialog Axiata Plc fell 0.88 percent and Commercial Bank of Ceylon fell 0.38 percent, leading the fall in the overall index.

"Market came off with the foreign selling and we have seen some margin calls being the month end and Friday," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd.

"The foreign selling which started off with the potential rake hike in September is continuing."

Another analyst said foreign investors may come in at low prices after the budget.

Stockbrokers also said the market is waiting for some clear direction from the government.

Prime Minister Ranil Wickremesinghe is expected to announce the country's economic policy on Nov. 5, government sources said, outlining the government's economic priorities ahead of the 2016 budget scheduled for Nov. 20.

($1 = 140.8500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anupama Dwivedi)

Three foreign banks to open soon

Shirajiv Sirimane in London

Two Middle East banks and an Asian Bank will be opening in Sri Lanka soon,Finance Minister Ravi Karunanayake said.

Speaking at the Invest Sri Lanka Investor Forum in London, he said that this is in addition to a Japanese bank opening their offices in Sri Lanka next year. “Together with the Prime Minister we have reactivated global investors who did not have a good relationship with Sri Lanka last year,” he said.

He said that now investor confidence is building and this proves the international investor community is behind Sri Lanka,” the Minister told investors at the forum. Commenting further he said that the government will provide all assistance for foreign investment and land ownership laws too will be relaxed depending on the size of the investment.

The Minister said that exchange regulations too will be relaxed at the next budget and exchange rules will be made something of the past.

He said that the local private sector too should get a wake up call and look at opportunities. “We will provide several incentives from the budget specially for the agriculture and logistics sector whihc we think the private sector could capitalise on”.

Tokyo Mitsubishi Bank to set up office here
The Bank of Tokyo Mitsubishi UFG Ltd (BTMU) will be opening a new representative office in Sri Lanka by end of March 2016. 

BTMU is the largest Bank in Japan established on January 1st 2006 with the merger of Bank of Tokyo Mitsubishi Ltd and UFJ Bank Ltd., It has a strong client base among leading Japanese corporates. This development facilitates investment by Japanese companies into Sri Lanka,an official said. The Bank said there are more than 100 Japanese corporates that have been investing in Sri Lanka and more investments are expected.

In the establishment of the new representative office in Colombo the Bank Tokyo Mitsubishi partnered with the Board of Investment of Sri Lanka and signed an agreement on 18.08.2014 with the BOI.

 Under this Memorandum of Understanding the Bank said that it would promote Japanese investments in Sri Lanka and foster business partnerships between Sri Lankan and Japanese entrepreneurs.

www.dailynews.lk

CSE’s Zurich forum draws strong interest from Swiss based investors

The first ever capital market investor forum held in Switzerland on Wednesday proved to be an outstanding success.

Titled ‘’Invest Sri Lanka’’ and organized by the Colombo Stock Exchange (CSE) in association with the Swiss Asian Chamber of Commerce (SACC), attracted a full house for the Breakfast Meeting at The Widder Hotel in Zurich.

The event saw the participation of major institutional investors surpassing the initial expectations of attendance and the interest in Sri Lanka was evident from the lively interaction, the participants had with the Sri Lankan delegation at the Question and Answer (Q&A) session, with topics ranging from opportunities in the stock market, foreign investor participation in future infrastructure developments, the ease of investing in the Sri Lankan stock market and the future economic potential of Sri Lanka.

Finance Minister Ravi Karunanayake, in his keynote address, called on Swiss investors present on the occasion to invest in the future investment destination that is Sri Lanka.

He said that since the change of the new government in January 2015, there is a strong national oriented government in place ushering in sustainable political stability for Sri Lanka.

Now that the process of political stabilization has taken place, the government is laying emphasis on the economic stabilization of the country. He stated that they have de-politicized the running of the administration through independent commissions appointed to look after the financial system, law and order, human rights etc.

The Minister invited the participants to visit Sri Lanka and see for themselves the positive reforms that are taking place in Sri Lanka.He assured the investors that investing in Sri Lanka would bring them better returns than investing in traditional European markets.

UN’s Permanent Representative in Geneva and Ambassador Ravinatha Aryasinha welcoming the participants said Sri Lanka and Switzerland have enjoyed a long relationship between the two countries and recalled that economic ties between the two countries go as far back as 19th century.

CSE Chairman Vajira Kulatilaka spoke about the potential of the stock market and emphasised that the time to invest is now, given that the market was relatively cheaper than most markets in the region.

He also cited how the CSE has significantly outperformed most regional markets. He cited Sri Lanka’s low market cap to GDP ratio against other markets as a growth opportunity. He further stated that the low co-relation with major global indices provided an excellent diversification opportunity for global institutional investors. Kulatilaka also spoke about the future developments of the capital market in relation to strengthening and improving the regulatory framework, addressing risk management, diversification of product range, governance, improvement of market infrastructure and institutional building.

Copal Amba Country Head, Chanakya Dissanayake in his presentation emphasized that the Sri Lankan stock market carries attractive valuations versus its peers specially in the context of Sri Lanka’s growth profile and stated that 2015 political reset augurs well for a robust investment climate in 2016.

Securities and Exchange Commission Director General Vajira Wijegunawardane outlined the measures that the SEC was taking to strengthen the regulatory framework of the capital market with the objective of creating an enabling environment for issuers to raise funds and instill adequate safeguards to protect investors and maintain professionalism in the industry.

A few of the investors present shared their investment experience in Sri Lanka which they described as a rewarding experience and expressed confidence of the future growth potential. (SS)

Sri Lanka a future investment destination - Finance Minister

Finance Minister Ravi Karunanayake called on Swiss investors to invest in the future investment destination that is Sri Lanka. He said that since the change of the new government in January 2015, there is a strong national oriented government in place ushering in sustainable political stability for Sri Lanka.

Karunanayake extended this invitation addressing the first capital market investor forum held in Switzerland on Wednesday.

This forum organized by Colombo Stock Exchange (CSE) in association with the Swiss Asian Chamber of Commerce (SACC), titled ‘’Invest Sri Lanka’’ attracted a full house for the Breakfast Meeting at The Widder Hotel in Zurich. The event saw the participation of major institutional investors surpassing the initial expectations of attendance and the interest in Sri Lanka was evident from the lively interaction, the participants had with the Sri Lankan delegation at the Question and Answer (Q&A) session, with topics ranging from opportunities in the stock market, foreign investor participation in future infrastructure developments, the ease of investing in the Sri Lankan stock market and the future economic potential of Sri Lanka. The Minister invited the participants to visit Sri Lanka and see for themselves the positive reforms that are taking place in Sri Lanka. He assured the investors that investing in Sri Lanka would bring them better returns than investing in traditional European markets.

www.dailynews.lk

Fitch affirms HNB Assurance and HNB General Insurance ratings

Fitch Ratings Lanka has affirmed HNB Assurance’s National Insurer Financial Strength Rating and National Long-Term rating at ‘A(lka)’.

Fitch has also affirmed its subsidiary HNB General Insurance Ltd’s National Insurer Financial Strength Rating and National Long-Term rating at ‘A(lka)’. The outlook on the ratings is stable. The ratings reflect the Sri Lanka-based insurance group’s satisfactory capitalisation in terms of regulatory solvency ratio, its prudent policy towards investment and modest market share.

The ratings also reflect synergies that HNBA enjoys from using parent Hatton National Bank’s wider branch network, HNBA’s importance to the bank in providing bancassurance products and HNB’s 60% stake in the insurance group. HNBA was established in 2001 and operated as a composite insurer until end-2014. On January 1 2015, the company transferred its non-life business to its fully owned subsidiary, HNB GI, while retaining the life business. This was done to comply with a regulatory requirement for insurers to split their life and non-life businesses by 7 February 2015.
www.dailynews.lk

Sri Lanka’s Sanasa Bank Sept net profit up 16-pct

ECONOMYNEXT – Sri Lanka’s Sanasa Development Bank said September 2015 quarter net profit rose 16 percent to 160 million rupees from a year ago with bad loans falling and interest margins improving.

Net interest income rose 23 percent to 841 million rupees with interest income up 41 percent to 1.7 billion rupees and interest expenses up 52 percent to 876 million rupees, a stock exchange filing said.

Net fee and commission income fell six percent to 61 million rupees.

Earnings per share for the September 2015 quarter were 4.13 rupees, up from 4.14 rupees the year before.

In the nine months to 30 September, EPS rose to 14.41 rupees from 12.50 rupees the year before.

Loans and receivables increased 35 percent to 43 billion rupees as at 30 September 2015 while liabilities went up 30 percent to 39 billion rupees from the previous year.

Sanasa Development Bank’s interest margin improved to 7.28 percent as at 30 September 2015 from 6.97 percent the year before while the bad loans ratio fell to 2.95 percent from 3.76 percent.

Sri Lanka Textured Jersey Sept net up 66-pct

ECONOMYNEXT – Sri Lankan fabric maker Textured Jersey Lanka PLC said September 2015 quarter net profit rose 66 percent to 468 million rupees from a year ago as it reaped gains from new acquisitions and kept costs under control.

Sales rose 16 percent to four billion rupees. Earnings per share for the quarter rose to 71 cents from 43 cents the year before, a stock exchange filing said.

Net profit margin rose to 9.15 percent for the period ended 30 September 2015 from 7.27 percent a year ago.

Chairman Bill Lam said the company has completed a “very strong quarter”, which included its first month of successful consolidation of Indian fabric maker Ocean India (Private) Limited (OCI) and a full quarter in the case of Quenby Lanka Prints (Private) Limited (QPL), an Indian fabric printer.

For the quarter ending 30 September 2015, TJL as a standalone company recorded a net profit of 379 million rupees, up 34 percent, he said.

“The bottom-line growth is driven primarily from economies of scale, tight cost management and improved operating efficiencies, which is reflected in the gross profit growth of 41 percent,” Lam said.

“TJL’s standalone performance was reinforced with the consolidation of both QPL and OCI, resulting in the group’s consolidated results reporting an impressive revenue growth of 16 percent and bottom-line growth of 66 percent.

“The group gross margin growth of 84 percent is driven by the envisaged sourcing synergies and group level cost management strategies, coupled with the successful turnaround that the teams have helped execute in each of the acquired entities,” Lam said.

Sri Lankan shares down, led by Commercial Bank

Reuters: Sri Lankan shares ended lower on Thursday for the first time in seven straight sessions as foreign investors sold shares in Commercial Bank of Ceylon amid uncertainty as the U.S. Federal Reserve revived expectations it may raise interest rates by year-end.

Foreign investors were net sellers of 319.1 million rupees ($2.26 million) worth of shares on Thursday, extending the year-to-date net foreign outflow to 3.44 billion rupees.

The main stock index ended down 0.34 percent at 7,070.13, from its highest close since Oct. 12 hit in the previous session.

The day's turnover was 898.8 million rupees, less than this year's daily average of 1.1 billion rupees.

Shares in top lender Commercial Bank of Ceylon fell 1.38 percent, leading the fall in the overall index.

"Foreign selling in Commercial Bank brought down the market," a stockbroker said on condition of anonymity. "We see some volatility until the Fed raises the rates."

Stockbrokers also said the market is waiting for some clear direction from the government.

Prime Minister Ranil Wickremesinghe is expected to announce the country's economic policy on Nov. 5, government sources said, outlining the government's economic priorities ahead of the 2016 budget scheduled for Nov. 20.

($1 = 140.9000 Sri Lankan rupees) 

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

90-pct vehicle leasing facility to come into effect today

(LBO) – Sri Lanka’s Finance Ministry said that a 90 percent leasing facility for motor vehicles will come into effect from Thursday.

An official notice will be sent out to the government and private financial institutions today, the ministry said.

From September 15, 2015, the 100 percent loan to value was limited to 70 percent by the Central Bank of Sri Lanka.

However, considering the negative impact this might have on the market the Finance Minister stated that a 90 percent leasing facility will be given for motor vehicles.

Sri Lanka's Lighthouse Hotel profits down on forex loss

ECONOMYNEXT - Profits at Sri Lanka's Lighthouse Hotel fell 21 percent to 6.2 million rupees in the September 2015 quarter from a year hit by a forex loss, while revenues remained flat.

The firm reported earnings of 14 cents per share for the quarter. In the six month to September profits were down 72 percent to 6.6 million rupees.

An upmarket hotel in Sri Lanka's South West coast near Galle, Lighthouse said revenue fell 1 percent to 169 million rupees while expenses was flat.

The was hit by a 7.8 million loss on a forex loan after Sri Lanka's rupee fell as the Central Bank printed money to finance a budget deficit.

Though a 'loss' is charged to account, assuming the same volume of sales priced in dollars, a fall in the currency increases nominal revenues, giving more rupees to service a forex loan.

Currency deprecation does not actually increase the real liability of dollar loans, but it decreases the real liability of loans and costs priced in domestic currency and real salaries of workers.

Many Sri Lankan hotels and also exporters have borrowed dollars in recent years, and charging the forex loss is important to reduce calls for currency depreciation, whose perceived benefits of devaluationism is an aspect of what is called the 'money illusion' and comes primarily from a fall in real salaries of workers.

Sri Lanka’s Trillion, Pan Asia in asset backed securitisation for hybrid cars

ECONOMYNEXT – Trillion Investments Limited, a Sri Lankan investment manager, launched what it said was the island’s first “green” asset backed securitisation with Pan Asia Bank, providing funding for hybrid vehicles.

Pan Asia Banking Corporation, which is supporting efforts to reduce Sri Lanka’s carbon footprint, has fully subscribed to the 750 million rupee five year issue of asset-backed securities, bond-like instruments that pay investors income based on car leases.

“The real sector has these transactions but there’s a vacuum in the financial sector,” said Kenneth De Zilwa, Chairman of Trillion Investments Limited.

“With the growth phase that Sri Lanka is in we believe that not only equity but debt plays a big part in asset creation and capital formation,” he told a news conference.

Neomal Goonewardena, Partner at Nithya Partners, which acted as Legal Counsel to the issue, said the asset backed securitisation provides funding for ‘green assets’, namely hybrid vehicles.

“Pan Asia Bank is financing the creation of green assets – in this case a pool of hybrid vehicles, which are environmentally-friendly assets,” he said.

Tyrone Hannan, Head – Global Transaction Banking, Deutsche Bank, said the bank is the Trustee and Administrator to the issue.

“This first time issue opens up a new source of funding opportunities for investors.”

Browns Capital buys into Sri Lanka solar power plant

ECONOMYNEXT - Browns Capital PLC said it had invested 407 million rupees to acquire a 50 percent stake in Saga Solar Power (Pvt) Ltd.

The firm said in a stock exchange filing it bought 38.7 million shares of Saga Solar Power (Pvt) Ltd. which operates a 10MW solar power project at Baruthakanda village in southern Hambantota.

The Saga Solar power plant, set up under the Sri Lanka Sustainable Energy Authority, has a 20-year power purchase agreement.

Candor Opportunities Fund IPO draws Rs. 353 m

By Shehana Dain

The Candor Opportunities Fund has so far raised Rs. 353.48 million through its Initial Public Offering.

Candor Asset Management Ltd. said as of Monday the offer had received 306 applications 
via cheques requesting 25.324 million units worth Rs. 253 million and two applications via bank transfer/RTGS transfer for 10 million units worth Rs. 100.25 million.

Candor Opportunities Fund is the first listed fund by CAM. It is offering 50 million units at the initial offer or IPO with the option of increasing the number of units on offer to 75 million, making the total offer value Rs. 750 million.

The IPO which opened on 20 October will remain open until 4:30 p.m. on 9 November or until the offer is fully subscribed.

The fund will be a five-year close-ended fund which would adopt dynamic asset allocation strategies and invest in both listed shares and fixed income securities depending on the investment climate. This strategy is expected to limit any downside risk while capitalising on upward movements in the stock market. While the primary investment objective of the fund is to achieve long-term growth of capital, the fund will also provide annual income to unit holders by way of annual dividends.

Deutsche Bank AG acts as the trustee and custodian for the fund will charge a trustee fee of 0.15% of the net asset value per annum and Rs. 20,000 a month from the whole fund as a custody fee.

The interests of unit holders are safeguarded by the Trustee, and the fund is regulated by the Securities and Exchange Commission of Sri Lanka.

Candor’s parent company; Dubai’s Eagle Proprietary Investment Ltd. invested Rs. 100 million at the IPO to show its confidence in the fund and the Sri Lankan equity market. - www.ft.lk

Lanka raises US$ 1500 m more in bonds

The Central Bank of Sri Lanka (CBSL), on behalf of the Government has raised US$1,500 million 10-year International Sovereign Bonds (Bond) with a coupon of 6.850% per annum at par on October 27.

This marks Sri Lanka's ninth US Dollar benchmark as well as the largest offering in the international bond market since 2007,the Central Bank said.

The Bonds have been rated 'BB-', 'B1' and 'B+' by Fitch Ratings, Moody's Investors Service and Standard and Poor's respectively. Citigroup, Deutsche Bank, HSBC and Standard Chartered Bank were Joint Lead Managers and Bookrunners of this successful transaction.

Final order books stood at US$3.3 billion from 290 investor accounts, achieving an oversubscription ratio of 2.2 times. The allocation of the Bond was 55% for The US, Europe 29% and Asia 16%. The allocation by investor type was 88% for fund managers, banks 9% and pension / insurance agencies 3%.
www.dailynews.lk

Ceylinco Life named World Finance's 'Best Life Insurer in Sri Lanka'

World Finance, the respected UK-based magazine, has reaffirmed Ceylinco Life as the 'Best Life Insurance Company in Sri Lanka' for a second consecutive year.

This is following an in-depth assessment of key performance indicators.

The accolade is based on scores accorded to the company on multiple parameters pertaining to long term insurance. These include underwriting process/process efficiency; policy maintenance - the process of reviewing clients' policies, appropriateness of coverage and cost per policy; exposure to risk; customer retention rate; time taken to settle claims; new customer acquisition rate and financial stability - premium income, life fund and market share.

"Eleven consecutive years of market leadership in Sri Lanka is by itself an emphatic statement of our status as the country's best life insurer," Ceylinco Life Managing Director and CEO R. Renganathan said.

"However, an independent assessment of key performance indicators by a panel of expert international analysts is always helpful in benchmarking the company."

The World Finance judging panel boasts over 230 years of financial and business journalism, supported by a research team that works round the clock to ensure its award winners are the most deserving in their sector.

For the year ending December 31, 2014,Ceylinco Life reported total income of Rs 18.54 billion with premium income of Rs 12 billion and investment income of Rs 6.83 billion.The value of the company's investment portfolio rose to Rs 57.2 billion, assets to Rs 71.07 billion and its Life Fund to Rs 60.02 billion.

Begun in 2007, World Finance magazine's award programmes are tailored to provide a comprehensive analysis of the very best in each market. The judging panel is required to avoid bias towards criteria such as depth of practice and size of company, in order to get an insight into different geographies and niche areas.
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Lanka ranks 107 in Ease of Doing Business Rankings this year

The World Bank has placed Sri Lanka at 107th out of 189 countries in the latest report on the Ease of Doing Business rankings 2016.

The Doing Business report records 22 economies worldwide with resolution times above 1,000 days and four of them are in the South Asia region, namely Afghanistan, Bangladesh, India and Sri Lanka.

Sri Lanka made starting a business easier by eliminating the requirement to notify the Registrar of Companies of the payment of stamp duty for the initial issuance of shares.

According to the report, Singapore secured the first place followed by New Zealand, Denmark, South Korea, Hong Kong, Britain and the US. India is placed 130th while Pakistan is placed 138th.In protecting minority investors, Sri Lanka ranks 49th while in getting credit it is now placed at the 97th spot.
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Singer revenue grows 34% in 3Q

Singer Sri Lanka continued its 2015 aggressive growth agenda posting impressive third quarter results as Group revenue increased by 34% during the period,the company said.

Year-to-date revenue reached Rs. 27.1 billion, registering a growth of 30% from the previous year.

Contributing significantly to the dominant revenue and profit results were a range of initiatives and expansion plans conducted by the Group. These included the establishing of new shops, dealers and channels of distribution, improving and renovating shops, securing new brands and distributorships and the introduction of new products. A favourable improvement in the local business environment during the first nine months bodes well for the Group.

However, the company remains optimistic that the sharp 5% devaluation of the rupee seen in September and marginal increase in interest rates will not affect growth prospects.

Group Net Profit for the first nine months reached Rs. 830.8 million, surging 63% in comparison to the previous year. Company Net Profit grew to Rs. 578.2 million, an increase of 61% against the same period a year ago.

Singer Sri Lanka Group CEO, Asoka Pieris said they have a marked increase of profits in 2015 over that of 2014 and 2013. "However, we need to be mindful our profit is still 6% below 2012, which was the highest profit recorded at end-September."

Pieris added, "During the third quarter, Net Profit is below the prevision year. However, the previous year third quarter had a reversal of provisions created in first and second quarters for possible liabilities. If the impact of this reversal is discounted, profits for this third quarter will be substantially above prior year."

Sparking revenue growth was the Communication and the Digital Media segment which grew 78% and has become the second highest segment surpassing the Consumer Electronics and Sewing category.
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Sri Lanka's Treasuries yields drop

ECONOMYNEXT - Sri Lanka's Treasuries yields dropped across maturities at Wednesday's auction with the 12-month yield dropped 10 basis points to 6.61 percent, data from the state debt office showed.

The 6-month month yield dropped 04 basis points to 6.99 percent and the 12-month yield dropped 04 basis points to 7.06 percent.

The debt office accepted 3.0 billion rupees of 3-month bills, 17.4 billion rupees of 6-month only 2.6 billion rupees of 12-month bills, totalling 23.0 billion rupees.

There is an estimated 35 billion rupees of bills maturing this Friday, indicating that either the Central Bank will print money to buy the bills or some of it is in its own portfolio.

Intervening in interest rates beyond the overnight policy rates in times of strong credit growth is part of a repertoire of tools used by Sri Lanka's soft-pegged central bank to precipitate balance of payments crisis, critics who are calling for fundamental reforms of the monetary authority say.

On October 28, Sri Lanka sold a 1.5 billion US dollar sovereign bond.

Sri Lankan shares gain for 6th session; Keells leads

Reuters: Sri Lankan shares rose for a sixth straight session on Wednesday to a more than two-week high despite foreign outflows, led by market heavyweight John Keells Holdings Plc.

Foreign investors were net sellers of 226.4 million rupees ($1.61 million) worth of shares on Wednesday, extending the year-to-date net foreign out flow to 3.12 billion rupees.

The main stock index ended 0.15 percent or 10.61 points up at 7,094.09, its highest close since Oct. 12.

The day's turnover was 1.14 billion rupees ($8.09 million), just above this year's daily average of 1.1 billion rupees.

"People are taking some positions and it looks like the interest is coming back to the market," said a stockbroker asking not to be named.

"Retailers have not been active. They are awaiting proper direction and positive sentiment. But the market is looking good and interest level will continue to grow."

Danushka Samarasinghe, head of research Softlogic Stockbrokers, said a $1.5 billion 10-year sovereign bond sale on Tuesday is seen as a positive.

Sri Lanka paid less than it had expected to borrow $1.5 billion via a 10-year sovereign bond on Tuesday, with strong orders helping bring down the yield on the issue to 6.85 percent from an initial guidance of around 7 percent.

However, the borrowing cost for Sri Lanka's largest eurobond issue was expensive compared with the previous 10-year papers.

Prime Minister Ranil Wickremesinghe is expected to announce the country's economic policy in the first week of November, outlining the government's economic priorities ahead of the 2016 budget scheduled for Nov. 20.

Analysts said a government move to implement a budget proposal for a retrospective tax targeting corporates has dented sentiment.

Shares of conglomerate John Keells Holdings rose 1.52 percent. 

($1 = 140.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anupama Dwivedi)

Palm oil props up Sri Lanka’s Watawala Plantations September profit

ECONOMYNEXT – Sri Lanka’s Watawala Plantations said September 2015 quarter net profit shot up 320 percent to 131 million rupees from a year ago with profits from palm oil and branded teas helping offset losses from tea and rubber production.

Sales fell 13 percent to 1.6 billion rupees in the quarter but the firm also managed to cut costs sharply, according to interim accounts filed with the Colombo stock exchange.

Earnings per share for the September 2015 quarter rose to 55 cents from 13 cents the year before.

EPS for the six months ended September 2015 were stagnant at 1.11 rupees.

Watawala Plantations Managing Director Vish Govindasamy said the company continues to enhance the quality of its teas in order to gain a price advantage, while continuing to increase the palm oil yield.

The palm oil business made a “significant contribution” to company profitability, he said in a note accompanying the results.

Palm oil, which has import tariff protection, made a net profit of 436 million rupees for the September 2015 quarter compared to 421 million rupees in the same quarter last year.

Palm oil revenue grew only five percent to reach 865 million rupees in the September 2015 quarter from the year before mainly due to the increase in Crude Palm Oil production, Govindasamy said.

“The Net Sale Average marginally contracted compared to the corresponding period last year, consequent to a drop in the global palm oil prices.”

Losses in Watawala Plantations’ tea business grew to 243 million rupees in the September 2015 quarter from a net loss of 200 million rupees in the same period last year.

Tea sales fell to 1.9 billion rupees from 2.5 billion rupees last year.

“The decline in the tea sector performance is mainly due to a decrease in production compared to the corresponding period last year while the NSA has been maintained flat at the previous year’s level,” Govindasamy said.

“The initiatives taken to improve the quality of its teas has helped to maintain the NSAs at the previous year level although a sharp drop was reported in the Colombo tea auction.”

Net profit from exports, mainly of value added teas, rose to 32 million rupees in the September 2015 quarter from 12 million rupees the year before with sales rising to 362 million rupees from 255 million rupees last year.

Sri Lanka credit to state up 27-pct in August, printed money up 67-pct

CREDIT BUBBLE:  Sri Lanka's credit is surging in 2015 partly fired by printed money which is also keeping interest rates low.

ECONOMYNEXT - Sri Lanka credit to the government from commercial bank rose 27.4 percent in August 2015 from a year earlier with Central Bank credit (printed money) up 67 percent, official data showed as pressure mounted on the currency and foreign reserves.

Credit to the private sector rose 64.6 billion rupees to 3,068 billion rupees in August up, 21.3 percent from a year earlier.

Credit to state enterprises rose 6.7 billion rupees to 482.5 billion rupees, up 42 percent from a year earlier.

Since May however credit state enterprises have not grown.

Credit to the government from the banking system was stable at 1,735.6 billion rupees but Central Bank credit (printed money) rose by 25.6 billion rupees to 244.5 billion rupees.

The data indicates that some loans to bank had been repaid with printed money, which has the most de-stabilizing effect on the credit system, currency and the country's economy.

Central Bank credit, created by buying Treasury bills into with printed money generates excess demand in the economy, driving up imports. Unless foreign reserves are sold to 'redeem' the rupees in forex markets, the newly created money will force the currency to depreciate.

Central Bank credit was up 67.9 percent or 98 billion rupees in the year to August 2015.

Analysts say the official CB credit number understates the actual volume of excess demand generated by the Central Bank in the past year to generate balance of payments trouble and drive credit to unsustainable levels.

Due to the way data is accounted for liquidity releases by terminating term repo deals are not counted as CB credit, but they have exactly the same effect on credit, imports and the currency as outright monetization of debt.

Sri Lanka’s apartment market booming, but seen rife with risks

ECONOMYNEXT – The market for apartments in Sri Lanka is opening up with more developers coming in, giving greater choice, but buyers should take care to check title deeds and financial strength of property companies, an industry official warned.

The consumer mind-set is changing. Sri Lankan customers are realizing the value of apartments,” said Brahmanage Premalal of Prime Lands, a property developer.

“Their apprehensions have gone and the market segment has opened up with many opportunities for investors and developers. A lot of developers are coming in. It’s good for customers who have more choice.”

But he warned that there were risks in buying apartments and that buyers should take care to minimize these risks.

“Buyers need to be vigilant because they’ll be spending their lifetime savings,” Premalal ttold the annual real estate conference held by Lamudi, an online real estate platform.

Among the risks were non-completion, not meeting delivery deadlines or quality standards, and not getting clear title which may lead to litigation, he said.

Sometimes property companies may go bankrupt since many build properties relying on the cash flow provided from pre-sales.

“Most apartments are sold on presale basis so you get the property only in 2-3 years,” Premalal said.

“You must know your developer, do thorough background checks on them and see what previous projects they have done.”

He also warned that buyers must check title deeds since some properties going around are not good quality deeds.

“Sometimes you might get doctored or altered title,” Premalal said. “You must go beyond the land registry search and check extracts. See if the developer owns the property.

“There can be disputes. The developer may not have the financial capability to buy the land as building property involves bigger capital. The developer may be depending on your cash flow from presales and might get stuck halfway.”

Sri Lanka's Pan Asia Bank net up 197-pct with strong loan growth

ECONOMYNEXT - Profits at Sri Lanka's Pan Asian Bank rose 197 percent to 300 million rupees in the September 2015 quarter from a year earlier, helped by sharply higher loan growth and other income, interim accounts show. 

The bank posted earnings of 1.01 rupees per share for the quarter. In the nine months to September the bank posted earnings of 2.45 rupees per share, on total profits of 750 million rupees, which rose 171 percent. Fee income rose 26 percent to 189 million rupees. 

Other income which included exchange gains rose 161 percent to 217 million rupees. Loans grew 32 percent to 79 billion rupees during the nine months to September. Pan Asian Bank made loan loss provisions of 251 million during the quarter up from 74 million rupees a year earlier. 

Gross non-performing loans fell to 5.36 percent from 5.73 percent with strong loan growth. Financial investments held to maturity also rose 261 percent to 9.2 billion rupees. With a looming balance of payments crisis and a wide budget deficit, investments in long term government debt is considered risky this year. 

Customer deposits rose 19 percent to 77.4 billion rupees during the period. The bank also raised 10 million US dollars (1.43 billion rupees) from Global Climate Partnership Fund, a 'green' financing facility. Net assets grew 16 percent to 5.4 billion rupees and gross assets grew 29 percent to 103 billion rupees, topping the 100 billion rupee mark. 

The bank's core capital adequacy ratio fell to 7.14 percent in September from 8.97 percent in December amid strong loan growth but remains above the regulatory minimum. Total capital adequacy was also at 11.66 percent, though down from 14.19 percent.

Fitch rates Sri Lanka's US dollar bond 'BB-(EXP)'

ECONOMYNEXT - Fitch Ratings said it has assigned Sri Lanka's forthcoming US dollar-denominated bond an expected rating of 'BB-(EXP)'.

The expected rating is in line with Sri Lanka's Long-Term Foreign-Currency Issuer Default Rating (IDR) of 'BB-' with Stable Outlook, the rating agency said in a statement.

“The rating would be sensitive to any changes in Sri Lanka's Long-Term Foreign-Currency IDR,” it said.

In April 2015, Fitch affirmed Sri Lanka's Long-Term Foreign-Currency IDR at 'BB-' with a Stable Outlook. The Long-Term Local-Currency IDR is also 'BB-' with Stable Outlook. 

Japan’s Kansai firms keen on investing in Sri Lanka

ECONOMYNEXT – The Ceylon Chamber of Commerce has signed ‘Agreement of Cooperation’ to promote two way commercial ties with Japan’s Kansai Economic Federation whose firms want to invest in Sri Lanka.

It enables both sides to exchange information on economic and business trends in the two countries, cooperate in trade, investment, environment conservation and energy-saving and work on human resources development.

A statement said the agreement’ was signed at a ‘Round table’ meeting with a top Japanese business delegation, led by the Kansai Economic Federation to explore business opportunities in the island.

It was held by the Ceylon Chamber of Commerce together with the Sri Lanka – Japan Business Cooperation Committee.

Masayuki Matsushita, Vice Chairman and the Chairperson of the International Committee of the Kansai Economic Federation said Kanzai region has a strong interest in expanding business to Sri Lanka.

Japanese firms such as Panasonic, Mitsubishi, Nippon Express, Takenaka Corporation, Hitachi Zosen, Marubeni Corporation, Daikin Industries, Mitsui and Company limited and Kyoei Steel Limited took part in the talks with Sri Lankan firms.

Sri Lanka launches 10-year sovereign bond

ECONOMYNEXT - Sri Lanka has launched a 10-year benchmark issue sovereign bond (minimum 500 million US dollars) with a price guidance of 7.00 percent, a media report said.

According to Bloomberg Newswires data, a 10-year bond issued earlier this year at 6.125 percent was quoted around 6.5/6 percent, in the secondary market.

Citi, DB, HSBC and Standard Chartered Bank is marketing the bond.

Standard and Poor's has given a B+ rating for a sovereign bond of up to a billion US dollars.

Commercial real estate market has high potential for ROI: Analysts

(LBO) – The demand for Sri Lanka’s commercial property is growing and there will be high potential for return on investment, experts said.

“Sri Lanka’s commercial real estate has high potential for return on investment (ROI),” Ravi Abeysuriya, group director of Candor, a financial consultancy service said.

“Retail rental yields for commercial property average around 10 percent.”

The demand for commercial property is growing strongly in Sri Lanka where the focus was previously in residential properties.

He was speaking at the second annual real estate conference organized by Lamudi Sri Lanka held in Colombo recently.

Experts say that there is a strong demand for good commercial space in Colombo and this demand is not expected to slacken given the island’s macro-economic outlook.

“The commercial property market had been ignored for many years because developers were getting good returns on residential properties,” Roshan Madawela, managing director of Real Estate Intelligence Unit (RIU), a real estate consultancy said.

“However now international investors are showing interest and we see the entry of more commercial projects.”

RIU data shows that Sri Lanka’s top end of commercial space offers around 2.5 million square feet of space in total provided by around a dozen developments with the World Trade Center topping the list for aggregate capacity with a total of over 700,000 square feet available for commercial purposes.

“The prevailing rental rates show that the WTC is still well ahead of the pack,” he said.

“Looking at the overall rental price levels, we see that the market has enjoyed exceptional price hikes over the past five years.”

This price surge Madawela says is due to the fact that the market has been dealing with an acute shortage in supply of grade A space in and around the city for several years.

“With occupancy at the top facilities close to 100 percent, those seeking large space have had to settle for the middle market, both in the city and in the suburban areas.”

However Abeysuriya says that the island still lacks innovative financing options for commercial real estate, but can expect improved financing options.

“Soon we will see new financing options such as REITS and CMBS becoming available for commercial real estate developers,” he said.

A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges like a stock while a commercial mortgage-backed security (CMBS) is a fixed-income security, typically in the form of a bond, which uses commercial real estate loans as collateral.

“They provide investors with an extremely liquid stake in real estate and receive special tax considerations and typically offer high dividend yields,” he added.

Central banks may use negative interest rates as stimulus

(LBO) – Negative interest rates is a possibility in the United States following in the foot steps of interest rates pushed below zero in countries such as Sweden, Switzerland and Denmark, according to some analysts.

Speaking in Colombo at the DFCC Economic Forum, Akshay Chinchalkar, head of charts and technical analysis for Bloomberg in South Asia, said no central bank knows how to handle deflation.

Central banks worldwide have cut interest rates 68 times this year and some countries are experiencing negative interest rates.

Investors now pay the Swedish and Swiss governments to hold their cash, a phenomenon previously thought unlikely by economists, which could be used to attempt further economic stimulation.

Sweden’s Riksbank has a repo rate of negative 0.35 percent, and in Denmark the rate on certificates of deposit with the central bank is negative 0.75 percent.

The U.S. government has held 46 Treasury-bill auctions since 2008 in which yields have been zero, according to CNBC.

Narayana Kocherlakota, president of the Minneapolis Fed, said on Oct 8 that the Fed should consider pushing rates below zero to help raise employment and drive inflation toward the Fed’s two percent target which it has missed for the past six years.

Although the need for negative interest rates is a minority view, many Fed members have expressed their opposition to a rate hike this year.

According to Chinchalkar, loose monetary policy has pushed up stock markets worldwide creating a false sense of economic prosperity.

There has been a concurrent surge in central bank balance sheets to the tune of 10 trillion dollars, with central banks holding more bonds.

“The big risk is to bond prices when interest rates start going up,” he said.

Fitch Assigns Sampath Bank’s Subordinated Debt Final ‘A(lka)’

(LBO) – Fitch Ratings has assigned Sri Lanka’s Sampath Bank PLC’s Base lI-compliant subordinated debentures of up to seven billion rupees , a final National Long-Term Rating of ‘A(lka)’.

The final rating is the same as the expected rating assigned on 9 October 2015, and follows the receipt of documents conforming to information already received, the rating agency said.

The debentures will mature in five years and carry fixed and floating coupons.

Sampath Bank plans to use the proceeds to strengthen its Tier 2 capital base and match the duration of the assets and liabilities in its long-term lending portfolio. The debentures are to be listed on the Colombo Stock Exchange.

Fitch Rating’s rating drivers are given below :-

KEY RATING DRIVERS

The issue is rated one notch below Sampath Bank’s National Long-Term Rating to reflect the subordination to senior unsecured creditors.

Sampath Bank’s rating reflects its lower capitalisation relative to that of its peers and relatively higher risk appetite, which offset benefits from the growth of its franchise. The Outlook is Stable.

RATING SENSITIVITIES

The rating on the proposed debentures will move in tandem with Sampath Bank’s National Long - Term Ratings.

Fitch views the upside potential of Sampath Bank’s ratings as limited as long as the trend of higher risk-taking and declining capitalisation persists. A sharp decline in its asset quality could result in a rating downgrade.

At treasury bond auction Rs45.4 bn bids accepted

(LBO) – Sri Lanka’s Treasury bond auction on Monday for 30 billion rupees in bonds received bids amounting to 129.7 billion rupees. The Central Bank accepted 45.4 billion rupees worth of bids.

Bonds maturing on 15 September 2019 received 32.5 billion rupees in bids for seven billion rupees in bonds on offer. The central bank accepted eight billion rupees in bids. The weighted average yield was 9.14 percent down from 9.5 percent at the previous auction.

For bonds maturing on 1 October 2022 the auction received 32.6 billion rupees in bids for seven billion rupees in bonds on offer. The central bank accepted 6.22 billion rupees in bids. The weighted average yield was 9.65 percent down from 9.95 percent at the previous auction.

Bonds maturing on 1 September 2028 received 27.2 billion rupees in bids for six billion rupees in bonds on offer. The central bank accepted 8.88 billion rupees in bids. The weighted average yield was 10.39 percent down from 11.04 percent at the previous auction.

Bonds maturing on 15 March 2035 received 37.2 billion rupees in bids for 10 billion rupees in bonds on offer. The central bank accepted 22.34 billion rupees in bids. The weighted average yield was 11.13 percent down from 11.20 percent at the previous auction.

Sri Lankan shares end steady; turnover at 6-wk low ahead of holiday

Reuters: Sri Lankan shares ended steady on Monday, but the day's turnover slumped to a six-week low ahead of a holiday as investors awaited clues from a key policy statement by the government.

The main stock index ended up 0.03 percent at 7,083.48, its highest close since Oct. 12. It gained for a fifth straight session, closing at its highest in nearly two weeks.

Turnover slumped to its lowest since Sept. 11 ahead of a holiday on Tuesday. The day's turnover was 481.4 million rupees ($3.41 million), less than half this year's daily average of 1.1 billion rupees.

Both currency and stock markets will be closed for a Buddhist religious holiday on Tuesday.

"It's a very dull day and nothing was happening. Investors are waiting for the budget to be announced," said Yohan Samarakkody, head of research at SC Securities (Pvt) Ltd.

"The cloud needs to be cleared with regard to the economy. Everyone has taken a step back and is looking at the direction of the overall economy."

Foreign investors, who have been net sellers of 2.89 billion rupees worth of equities so far this year, bought a net 23.1 million rupees worth shares on Monday.

Prime Minister Ranil Wickremesinghe is expected to announce the country's economic policy in the first week of November, outlining the government's economic priorities ahead of the 2016 budget scheduled for Nov. 20.

Analysts said a government move to implement a budget proposal of a retrospective tax targeting corporates has dented sentiment.

Shares of conglomerate John Keells Holdings rose 0.85 percent, while Sri Lanka Telecom Plc gained 1.46 percent. 

($1 = 141.0000 Sri Lankan rupees) 

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

Colombo Stock Exchange promotes SL Capital Market in Europe

The Colombo Stock Exchange (CSE) will host “Invest Sri Lanka” Investor Forums in Zurich on October 28 and on London 29.

The Breakfast Meeting in Zurich will be hosted in association with the Swiss Asian Chamber of Commerce (SACC), while the Investor Forum in London will be hosted in association with Bloomberg.

The combined attendance at the forums numbers nearly 200 and includes major Institutional Investors with assets under management of USD 110 Million or above.

The Breakfast Meeting in Zurich held at the Widder Hotel will be an event which will show case Sri Lanka’s potential as an investment destination, Whereas the Forum in London to be held at the Savoy spanning two days, will feature a longer programme and allow for investors to meet with Listed Companies.

The Forum in London will feature 12 Listed Companies which will each hostone-on-one or group meetings. The companies attending are; John Keells Holdings PLC, Commercial Bank of Ceylon PLC, Hatton National Bank PLC, National Development Bank PLC, Dialog Axiata PLC, Carsons Cumberbatch PLC, Lion Brewery (Ceylon) PLC, People’s Leasing & Finance PLC, Softlogic Holdings PLC, Tokyo Cement PLC, Singer Sri Lanka PLC , MTD Walkers PLC and Sunshine Holdings PLC.

The Minister of Finance Ravi Karunanayake will deliver the keynote address, while Chairman of the Colombo Stock Exchange Vajira Kulatilaka and Director General of the Securities and Exchange Commission of Sri Lanka (SEC) Vajira Wijegunerwardane will make presentations on the opportunities in the capital market and the regulatory framework, respectively. A Macroeconomic Overview of the country will be provided by Country Head - Sri Lanka of Copal Amba (A Moody’s Subsidiary) Chanakya Dissanayake. The main presentations will be followed by a panel discussion and question and answer session with the audience.

In Zurich the Permanent Representative of Sri Lanka to the United Nations in Geneva, Ravinatha Ariyasinha will make the opening remarks while in London the opening remarks will be made by Acting High Commissioner to the United Kingdom Dr. Chanaka Talpahewa.

The London forum will also feature presentations by Chief Executive Officer, London Stock Exchange plc & Director of International Development and Ashish Swarup of First State Investments, as an endorsement of the Sri Lankan capital market and the investment experience in Sri Lanka.

- See more at: http://www.dailynews.lk/?q=business/colombo-stock-exchange-promotes-sl-capital-market-europe#sthash.YZCH5qtn.dpuf

Janashakthi shareholders approve Rights Issue to Fund Acquisition of AIA

In a bid to further bolster its position in the market, Janashakthi Insurance PLC., signed a share purchase agreement with AIA Insurance Lanka PLC., to acquire 100% of the shares of AIA General Insurance Lanka Limited on October 9, 2015.

Janashakthi’s entrepreneurial spirit, innovative products and steadfast growth momentum have helped the company establish itself as a formidable force in Sri Lanka’s insurance sector. This is further accelerated through this acquisition which the company intends to close by the end of the month, subject to customary closing conditions including regulatory and transactional approvals.

Janashakthi Insurance PLC., received the formal go ahead from its shareholders to raise over Rs.3.357 billion by way of a Rights Issue of over 181.5 million new ordinary shares at its Extraordinary General Meeting (EGM) held on October 16, 2015.

Under this rights issue, Janashakthi will be issuing one (01) new ordinary share for every two (02) ordinary shares (1:2) held in the capital of the Company at a price of Rs.18.50 per share.

The Board of Directors of the company had passed a resolution in this regard on August 19, 2015.
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Ceybank Equity Funds distribute over Rs 400 mn in tax free dividends again

For a second consecutive year, Ceybank Asset Management Limited, the managers for Ceybank Funds continued to distribute high tax free dividends paying out Rs 417 millionn for investors in their Equity Funds, Ceybank Unit Trust and Ceybank Century Growth Fund recently.

The distribution effectively would translate in to a tax free dividend of Rs. 2 per unit, totaling Rs 383 mn from Ceybank Unit Trust and Rs 34 mn from Ceybank Century Growth Fund for FY 2014/15. This distribution follows the payout of a similar amount of Rs 417 mn for the previous financial year.

Chairman of Ceybank, A.M.L. Charith Kamaladasa said, “we are indeed happy to have distributed record tax free dividends to our investors for two consecutive years, despite volatile market movements.”

He added, “Our funds have outperformed the broader market, benefited by asset allocation decisions made by the fund management team. Additionally capital gains realized by trading of shares enabled us to declare a high dividend this year too.”

Chitra Sathkumara the CEO of Ceybank AML said the current dividend of Rs 2 per unit for both Ceybank Unit Trust and Ceybank Century Growth Fund would translate to a dividend yield of 6.9% and 3.2% respectively to its Unit Holders and an appreciation for the period of 6.03% and 13.25% respectively based on Unit offer prices as at March 31, 2014.

Sathkumara said the both Ceybank Unit Trust and Ceybank Century Growth Fund have achieved commendable returns for its investors over the years.

"For example the total return of an investor who had invested in Ceybank Unit Trust 10 years ago as at today would be 248% (CAGR of 13.3%) while it is 390% (17.2% CAGR) if one had invested on Ceybank Century Growth Fund.

He added the significant capital gains realized by the funds over the years have enabled the Funds to maintain its regular dividend policy even during the periods of poor market performance. "The Ceybank Unit Trust has realized Rs 3,965 mn while Ceybank Century Growth fund realized Rs552 mn during the last ten years as capital gains from the share trading." He further said, "With the current dividend, Ceybank Unit Trust has paid Rs.21.90 per Unit while the Ceybank Century Growth Fund which has paid Rs.17.00 per Unit cumulatively, more than the investment made by the original investor.

"Had an investor reinvested the dividends back in the Ceybank Unit Trust since inception in 1992 his investment would have grown at CAGR of 11.5% as against All Share Price Index growth of 9.9% while if he had done the same with Ceybank Century Growth Fund since inception in 1997 his investment would have grown at CAGR of 15.0% as against 14.31 growth in the All share Price Index"

Commenting on the outlook of the stock market, M. Sathkumara said that despite 2015 being a somewhat volatile period for the stock market due to the Presidential and Parliamentary elections "We think that the market has potential to grow with better corporate earnings being reported and the country gradually opening up as a potential investment destination. We are bullish on equities and are looking at providing our unit holders good returns in the medium to long term".

Ceybank Unit Trust which began operations in 1992 is the biggest Balanced Fund in the country with a Net Asset value of Rs. 5.7Bn. The Ceybank Century Growth Fund is the country's first Equity Fund was established in 1997, and has a Net Asset value of Rs. 1.2Bn.
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Seylan Bank PAT surges to Rs. 2.7 b, 21% growth over last year

Seylan Bank recorded an impressive performance with profit before income tax reaching Rs. 4,062 million for the nine months ended 30 September 2015. Profits after tax reached a record Rs. 2,730 million, a 21% increase compared to the Rs. 2,253 million reported in the corresponding nine-month period.

The quarterly PAT figure (Q-3 2015) was reported at Rs. 989 million, compared to the Rs. 1,041 million reported in the corresponding three months of last year.

Net interest income increased from Rs. 8.22 billion to Rs. 8.85 billion, an 8% increase for the nine months ended 30 September 2015. Net fee and commission income increased by 13% from Rs. 1,648 million to Rs. 1,869 million, with the bank showing a continuation of the solid growth trend recorded in the past few years.

During 2015, the bank grew its deposit base from Rs. 185.9 billion to Rs. 199.5 billion. A significant amount of this growth was achieved through the mobilisation of current and savings deposits, which enabled the bank’s low cost deposit base to be increased from 38% in December 2014 to almost 40% as at end September 2015. The bank’s net advance portfolio too increased from Rs. 155 billion to Rs. 172 billion, reporting an 11% growth during the nine months under review.

The bank was also able to improve its asset quality through effective recovery and rehabilitating efforts. This enabled the bank to reduce its Gross NPA (net of IIS) from 7.69% in December 2014 to 6.12% as at end September 2015. The bank has consistently been able to improve its asset quality since 2009 through focused, sustained and effective recovery efforts.

The bank based on its 4-year Strategic Plan (2012-2016) has focused significantly on areas which include advance/deposit growth, branch expansion, customer service improvement, staff development, NPA reduction, cost control, new product development, IT infrastructure, shareholder value, etc. The Strategic Plan also earmarks the opening of 100 libraries in underprivileged schools; 72 such school libraries have been opened by the bank since 2013.

The branch relocation and refurbishment project too continued full steam during 3Q 2015, with a view to enhance the customers’ service experience. The bank opened two new branches, fully refurbished another 12 branches and relocated a further two branches to more customer friendly locations. As of end September 2015, over 85% of the branch network has been refurbished since 2010.

As at 30 September 2015, the bank network comprised 159 branches, 181 ATMs and 93 student savings centres.

The bank’s total capital adequacy ratio stands at 13.13% at the end of Q-3 2015, well above the regulatory requirements. In July 2015, Fitch affirmed the Bank rating at ‘A –lka’ with a stable outlook.

As a result of the impressive performance, Earnings per share was at Rs. 7.91 for Q-3 2015, while return (profit before tax) on assets and return on equity stood at to 2.08% and 15.03% respectively. The bank’s net asset value per share as at 30 September 2015 was Rs. 72.31 (Group Rs. 75.76).
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Raj sells Rs 3.4M of Colombo Fort

Ceylon Finance Today: Business magnate A. Rajaratnam whose family is one of the main shareholders of several companies including the Lankem Group, C.W. Mackie, E.B. Creasy, Laxapana Batteries, Marawila Resorts plc as well as companies in the plantation sector, recently disposed of Rs 3.39 million worth of Colombo Fort Investments plc's shares.

Rajaratnam is a non executive director at Colombo Fort. The transaction comprised the sale of 34,996 shares of the company at Rs 97 a share. (PGA)

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Low, interest, inflationary regimes boost company earnings

Ceylon Finance Today: The Stock Market was reaping the benefits of a low interest rate and a low inflationary regime which saw listed company results in the quarter (Q) ended 30, September, 2015, witnessing their bottom lines grow, save one, in results thus far filed with the Colombo Stock Exchange (CSE) as at 12 Noon on Friday. The seven companies which had thus far filed quarterly results covered the financial services, food, chemicals and motor categories. Bottom line growth in the six profit making companies captured by......the CSE thus far ranged from within a low of 14% to a high of 1,661%.

Meanwhile, People's Leasing & Finance plc, a financial services company, in the 2Q ended 30 September, 2015 saw net profits (NP) grow by 13.66% year on year (YoY) to Rs 1,240 million, John Keells Stock Brokers (JKSB) said.

It further said that the company's net profits in the first half (1H) of the year to end 30 September, 2015 increased by 25.35% YoY to Rs 2,349 million. Growth in second quarter earnings were mainly supported by higher net interest income and lower impairment charges, JKSB in its report said.

The stock broking firm further said that Keells Food Products plc in the 2Q ended 30 September, 2015 saw NP grow by 79.55% YoY to Rs 95.50 million. JKSB also said that in the 1H ended end 30 September, 2015, Keells Food's NP grew sharply by 82.36% YoY to Rs 165.96 million. "Healthy revenue growth and robust margin expansion led to sharp earnings growth in the 2Q", said JKSB.

In related developments, "strong topline growth, coupled with margin expansion at the gross and operating level, resulted in Bairaha Farms plc achieving significantly higher quarterly earnings", JKSB said.

The company in the 2Q ended 30 September, 2015 saw NP grow by 1,660.58% YoY to Rs 143.39 million and half yearly profits by 465.74% YoY to Rs 287.68 million. JKSB also reported that Ceylon Cold Stores plc witnessed a significant increase in earnings for the Q, driven by increased revenues and higher earnings margins from the manufacturing and retail segments.

This saw Cold Stores increase their quarterly profits in the 2Q ended 30 September, 2015 by 129.13% YoY to Rs 706.47 million and half yearly NP by 106.76% YoY to a massive Rs 1,256.32 million.

In the financial sector, Union Bank, in the 3Q ended 30 September, 2015 saw NP grow by 51.13% YoY to Rs 76.69 million, while in the nine months ended 30 September, 2015, the Bank saw its NP increase by 84.59% YoY to Rs 144.71 million.

JKSB in its report on Union's performance said, strong loan book growth resulted in a healthy increase in interest income despite a contraction in NIMs, while increases in fee and commission income and net trading gains augmented total operating income. "These complemented by a steep reduction in total impairment charges, more than offset a significant increase in operating expenses, resulting in a sharp increase in earnings for the 3Q, said JKSB.

Meanwhile, Union Chemicals in the 3Q ended 30 September, 2015 saw NP grow by 82.88% YoY to Rs 21.08 million and in the nine months ended 30 September, 2015 by 92.63% YoY to Rs 68.45 million.

The only fly in the ointment was Autodrome plc which provides ancillary services to the transportation industry. The company made a Rs 148,000 loss in the 2Q ended 30, September, 2015; compared to a Rs 8.71 million profit in the corresponding Q of the previous year.

Autodrome in the 1H ended 30, September, 2015; saw NP decline by 17.4% YoY to Rs 14.95 million.

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Abans Finance PLC. On profitable path

By Rishar Mohamed Saleem

Ceylon Finance Today: A financial analysis carried out by Professor Kennedy D. Gunawardana of University of Sri Jayewardenepura (USJ) indicates that Abans Finance Plc limited has recovered from an unprofitable previous year to a profitable footing in 2015. 

His analysis indicates all the vital areas are more towards profits after the declining profit situation it faced in 2014.

He stressed "Even though the company profits declined in year 2014 the profit for year 2015 grown up drastically. Profit before tax stood at Rs 29 million and it was increased up to Rs 109 million, which was 276% growth compared to previous year. Profit after tax also moved from Rs 9 million to Rs 73 Million which was 711% growth than previous year.

Ceylon Finance Today discusses with Professor. Kennedy D Gunawardana, Professor of Accounting Information Systems and Chairman of Board of Management Studies Faculty of graduate studies, coordinator of PhD programme of the faculty of graduate studies of the USJ 'in perspective' the Financial Statement of Abans Finance plc.

His analysis of total operating income indicates the following:

Incomes of the company consist of interest income, fee and commission income, and net gain/loss from trading and other operating Income. Based on the year 2012, as per the horizontal analysis income movement as follows: All the components of income shows gradual growth when compared to the year 2012 except other operating income which showed a sudden decrease in 2015 compared to base year. Other operating income declined in 2013, however grown up in 2014 where it decline drastically in 2015 compared. Fees and commission income showed significant growth when compared with base year amount which is 377.05% growth in 2015. This growth was mainly due to decline of interest rates within the industry.

Composition of Total Operating Income

It can be clearly identified that the company' income mainly consists of Interest income which was around 90% of the total income. Other incomes such as fees and commission income, net gains/losses from trading and other operating income consists of around 10% of the total income.

When comparing interest income and interest expenses between year 2013 and 2014 it showed that interest income rose by 27.24 % and expenses by 17.99%. However when 2014 was compared with 2015, the interest income increased by 24% and interest expenses were only increased by 5.86%.However this high growth of interest income and moderate growth of interest expenses were supported to a growth of Net interest income by 47.31% to a Rs 444 Million.

Profitability

Even though the company profits declined in year 2014 the profit for year 2015 grown up drastically. Profit before tax stood at Rs 29 million and it was increased up to Rs 109 million, which was 276% growth compared to previous year. Profit after tax also moved from Rs 9 million to Rs 73 million which was 711% growth than previous year.
Return on Equity (ROE) and Return of Assets (ROA)

Impairment Charge

Impairment charge had been drastically grown in 94% in 2013 and 4268.33% in 2014 and 2015 respectively. The main reason for this was the disposal of repossessed vehicles at a loss to prevent the decline of market value of asset and considering time value of money. 

Impairment charge on accommodations increased mainly due to adverse age movements in Lease, Hire Purchase and other lending products such as Failure on Property Mortgages. 

Also failure of corporate customers were affected due to downgrade of their asset quality.

Total operating expenses were increased in 2015 when compared with base year 2012. The majority of increase was due to increase in personnel expenses which was increased by 102.36%. However the personnel cost were only amounted to 12.38 % and other operating cost were 16.71% when compared with total income of year 2015.

The operating expenses has grown due to growth of business. Other than that company increased allocation of money in staff development, infrastructure development and promotional campaigns conducted by the company.

When compared to previous year company has declined the cost income ratio even though the operating expenses of the company increased during the 2015. This was mainly due to increase in income.

Total Asset

The lease and Hire purchase portfolio showed growth in 2015 than 2014. It was amounting to 40% increase than previous year. This was stood at Rs 2903 Million at 2015. Loan and Advances and Real Estate Stock also decreased to LKR 637 Million and LKR 97 Million respectively in year 2015. The negative impact was mainly due to negative growth in loan portfolio.

Due to growth of company's public deposits, company borrowings had been declined. Compared with the base year 2012 the company borrowings stood at 1.27% which was LKR 156 Million. Company had not borrowed money using other debt instruments and other instruments in year 2015. This was mainly due to increase in public deposits. Compared to the base year 2012 deposits from customer increased up to 136.38% and it consist of 75.24% of the total asset of year 2015.

As per the Debt to equity ratio specify that the company has higher liabilities than total shareholders' funds. The gradual increase in Debt to Equity ratio was mainly due to increase in customer deposit.

Abans finance PLC is incorporated on 08 April 2005 under Companies Act, No 17 of 1982 and reregistered on 15 June 2009 under Companies Act, No 07 of 2007. Company registered under Finance Leasing Establishment Act, No 56 of 2000 and as a Finance Company in terms of the Finance Companies Act No 78 of 1988.Company is a subsidiary of Abans (Pvt) Ltd which holds the 89.26% (as per 2013/2014 annual report) of the stake of the company.

This report mainly focuses to conduct analysis of Abans Finance Plc. Significant items in the Statement of Financial Position and Statement of Comprehensive Income were considered to this analysis using 5 year historical data. Horizontal Analysis, Vertical Analysis, Trend Analysis and also ratio analysis carried out using tables and graphs to analyze the company.

For the horizontal analysis year 2012, is selected as the Base year.

There were increases and some declines were identified in some significant items. This was mainly due to growth of company portfolio and decline in interest rates where demand for credit increases during year 2015.

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