Ravi K warns companies not paying bonuses due to Super Gains Tax

Author GAYAN CHANDRASEKARA

(LBO) – Sri Lanka’s Finance Minister Ravi Karunanayake told Parliament Tuesday that the government is in search for big companies that are not paying bonus payments to employees.

“I was disappointed with some of the companies that pretended to be paying Super Gains Tax and stop certain payments,” he said.

“There is no right for any of them to deprive any money going out to the hard working employees of their company.”

Karunanayake revealed there are 2 or 3 corporate companies that have already mentioned they are not going to pay bonus payments this year due to the tax.

“We’ll look to those companies and see how decent those companies are,” he said.

“If they pay for themselves bonuses and deprived the people who are working under them by saying it is a government imposition; I think that is very unfair,” Karunanayake said.

“We call upon them to ensure if they had a wrong interpretation, correct it now,” he insisted.

The government is to collect between 65 to 70 billion rupees from the Super Gains Tax imposed through 35 big corporates in Sri Lanka.

Finance Minister introduces optional plan for banks to pay Super Gains Tax

Author GAYAN CHANDRASEKARA

(LBO) – Sri Lanka’s Finance Minister Ravi Karunanayake revealed in Parliament on Tuesday that an optional plan has been introduced for banks to pay super gains tax.

“Instead of banks paying (the tax directly) we are giving the opportunity back to them,” Karunanayake said.

“So instead of paying 1 billion we call upon them to create that into 9 or 10 times over and lend it to the government for our capital expenditure which we are buying at 9 to 10 percent but you are giving us at 6.5 to 7 percent,”

“It came from one of the bankers and I appreciate the suggestion that he gave.”

Finance Minister Ravi Karunanayake said they are open to suggestions.

“If they say they’ll invest 3 times over. Let’s take that option out. All we want is to grow the economy.”

The Finance Ministry is to collect about 35 to 40 billion rupees from the banks through the super gains tax.

Karunanayake further said that for non banks the tax is not written off from this year’s accounts and it will be written off as a note to the prior year accounts.

“We don’t need anyway that the adjustments made to this year accounts because that has no reflection at all. It’s a note to the previous year accounts,”

“We’ll ensure that this is an accepted practice and we instructed the accounting practicing standards to ensure its compliance,” he said.

Karunanayake said the government needs to recycle the funds and generate new jobs especially in lagging regions in the country.

“So what we get; if they basically take it to the areas where we want to invest, lagging areas such as north and east or areas having underemployment, that is what we exactly want.”

“If they feel employment generation is possible with that money that we have imposed on the tax; go ahead and do that, you create the jobs and we’ll set the standards. But ensure that is done in good spirit.”

Dialog and BOI signs Rs24.6bn investment agreement to improve ICT infrastructure

(LBO) – Dialog Axiata Plc entered into an agreement with Board of Investment of Sri Lanka to invest 25.6 billion rupees or 175 million US dollars to improve the Island’s ICT infrastructure, the company said in a filing to Colombo stock exchange.

The investment agreements span a broad scope of ICT infrastructure development by the Dialog group encompassing the expansion of 3rd generation and 4th generation high speed broadband servicers alongside further development of the group’s fiber optic transmission network, international telecommunication network and digital satellite television infrastructure.

The company says it will also direct targeted investments towards the expansion of its digital servicer’s portfolio spanning ventures and initiatives in digital payment, commerce education and health.

Sri Lanka People's Leasing Sept quarter net up 14-pct

ECONOMYNEXT – Lower interest costs helped People's Leasing & Finance Plc, Sri Lanka's largest non-bank lender, to increase September 2015 quarter net profit by 13.7 percent to 1.2 billion rupees from a year ago.

Earnings per share for the quarter were 78 cents compared with 69 cents the previous year, People’s Leasing & Finance, a unit of People’s Bank, said in a stock exchange filing.

Interest income fell 8.6 percent to 4.6 billion rupees in the quarter ended 30th September 2015 while interest expenses fell at a faster 23 percent to 1.9 billion rupees resulting in net interest income growing by 5.8 percent to 2.7 billion rupees.

Net earned premiums rose 11.6 percent to 817 million rupees while net fee and commission income fell along with trading income.

Impairment charges for loans fell 67 percent to 87 million rupees.

Vallibel to invest Rs8.4bn for Sri Lanka beach resort

ECONOMYNEXT - Vallibel One PLC, a diversified holding company for investments by Sri Lanka’s Dhammika Perera, said it will invest 60 million US dollars (8.4 billion rupees) on a luxury beach resort.

The 382-room five-star resort in Kochichikade, Negombo, on the west coast will be done by Greener Water Ltd., the leisure sector investment arm of Vallibel One, a stock exchange filing said.

The company has entered into an agreement with the Board of Investment, which grants tax concessions, in relation to the project which Vallibel estimated will cost about 60 million US dollars.

The company has said Greener Water has already invested 268.06 million rupees in the 14 acre free hold land.

The initial design concept for the hotel was done by WATG of Singapore, design consultants for the leisure and entertainment industry.

Sri Lanka plantations lose Rs80 per kilo of tea

ECONOMYNEXT – Sri Lanka’s regional plantations companies (RPCs) have offered a revenue sharing model with labour unions demanding high wages, saying they cannot afford anything more when they are losing 80 rupees a kilo at tea auctions.

At present, the production cost of a kilo of tea for RPCs is often in excess of 450 rupees primarily due to the high labour cost, the Planters’ Association said in a statement.

Labour cost constitutes 67 – 70 percent of the total cost of production (CoP) with the average revenue earned from the sale of a kilo of tea at the Colombo Tea Auction being only 368.30 in the first week of October 2015.

This represents a loss of more than 80 rupees per kilo, the statement said.

The PA said prices received at both rubber and tea auctions are now lower than in 2013 when the last wage hike (of 20 percent) was given to estate workers, indicating that even the present wage is unaffordable to the plantation companies.

The Regional Plantation Companies said they have put forward their recommendation for a revenue sharing model for the remuneration of estate workers.

“This bold initiative is the only sustainable solution and way forward, which would see a drastic change not only in increased incomes through improved productivity, but a radical change in the lifestyles and mindsets of the plantation workers,” the statement said.

“This is an important step that the industry is taking to set the future direction for sustainability in the plantation industry,” says Planters’ Association Chairman, Roshan Rajadurai.

“We are conscious that almost 1 million people are dependent on the Regional Plantation Companies although only 183,000 are registered workers and this system will be a win-win situation for both workers and us.”

The RPCs incurred a loss of four billion rupees on tea and rubber last year.

The new proposal enables high labour costs to be mitigated by improving worker productivity through performance-related pay – similar to the smallholder model – while enabling workers also to earn well beyond their present income. 

Sri Lanka Treasuries yields steady

ECONOMYNEXT - Sri Lanka has sold 33.32 billion rupees of Treasury bills with 3 and 6 month yields easing slightly, data from the state debt office showed.

The debt office sold 9.85 billion rupees of 3-month bills at 6.71 percent, down 02 basis points from a week earlier, 18.2 billion rupees of 6-month bills at 7.03 percent, down 01 basis point and 5.2 billion rupees of 12-mont bills at 7.10 percent, unchanged.

The debt office sold a total of 33.3 billion rupees of bills after offering 25 billion rupees for auction.

An estimated 38 billion rupees of bills are maturing this week.

Sri Lanka's central bank rejects market auction for Treasuries and takes it into its own balance sheet triggering balance of payments pressure when credit growth picks up.

On Monday however, data showed that it sterilized a large foreign exchange purchase from dollar bonds, which analysts say will help build up reserves which can be used to settle foreign loans or swaps.

Finlays Sri Lanka unit to delist, offers Rs302 per share

ECONOMYNEXT – Sri Lankan tea exporter Finlays Colombo Plc said it plans to delist its ordinary shares from the Colombo Stock Exchange.

A stock exchange filing said the firm has made arrangements for James Finlay Ltd. of Swire House, London to buy shares from shareholders at 302 rupees a share. Its shares last traded at 260 rupees.

The Finlays Colombo Board of Directors had taken the decision on October 20 subject to regulatory approval, it said.

The company blends and packages tea for export and is also into cold storage logistics, tea warehousing and insurance brokering.

Sri Lankan shares at 1-week high; retail investors buy blue chips

Reuters: Sri Lankan shares ended at more than one-week high on Wednesday, led by blue chips as retail and high-net-worth investors returned to the market, but foreign investors turned cautious ahead of the government's key policy statement.

The main stock index ended 0.2 percent, or 14.41 points, firmer at 7,055.67, its highest close since Oct. 13.

"We see the market slowly strengthening, with retail and high-net-worth investors buying into the market," said Dimantha Mathew, a research manager at First Capital Equities (Pvt) Ltd.

"Foreigners are on the selling side and the institutional and others are silent ahead of the government's policy statement and the budget," he said.

Analysts said investors were cautious ahead of Prime Minister Ranil Wickremesinghe's policy statement scheduled early next month outlining the government's economic priorities ahead of 2016 budget announcement scheduled on Nov. 20.

The prime minister will deliver the policy statement on Nov. 5 or 6, said Finance Minister Ravi Karunanayake while speaking at a public forum late on Monday.

Analysts said a government move to implement a budget proposal of a retrospective tax targeting corporate is the main concern for investors.

Turnover stood at 1.06 billion rupees ($7.5 million), in line with this year's daily average of 1.1 billion rupees.

Foreign investors were net sellers of 12.4 million rupees worth of shares on Wednesday, extending the year-to-date net foreign outflow to 2.93 billion rupees worth of equities.

Shares of Ceylon Tobacco Co Plc rose 0.78 percent, while conglomerate John Keells Holdings Plc gained 0.35 percent. 

($1 = 141.0000 Sri Lankan rupees) 

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

Wait-and-see approach by new companies on launching IPOs

By Hiran H.Senewiratne

The new government came in with numerous concessions to encourage new companies to go for Initial Public Offerings (IPO) but most companies have not been attracted to them due to conditions, such as, low value expectations.

The government came up with new economic reforms/polices to avert the current volatile situation in the capital market, deriving from the last budget. But several financial, manufacturing and exporting companies are waiting till conditions become stable to go for IPOs, market sources said.

"At present the new government’s massive concessions, including tax concessions, have not attracted new companies to be listed in the CSE because current market conditions are not inducing them to go for IPOs due to valuation issues, chairman, Sri Lanka Stock Brokers Association Ravi Abeysuriya told the Island Financial Review.

He said that current expectations depend on the rupee value against the US dollar and call on companies to go for IPOs that give value to the shareholders who invest in stocks rather than depend on government concessions.

Head of Marketing Softogic Stock Brokers Eardley Kern told the Island Financial Review that several importers and manufacturing companies are waiting for clear directions from the government to go for IPOs.

He said several IPOs that came up in the recent past were not successful and now everything would depend on the forthcoming budget.

In this scenario several companies are waiting till the right time to go for an IPO. Therefore, the new government should come out with proper economic reforms in the budget on the Colombo Stock Exchange, he said.

Sri Lanka’s credit worthiness will be decided on economic development that the new government would be able to maintain in the future and on its ability to manage debts, says prominent international rating agency Moody’s.

The International Monetary Fund has continued to warn that the Sri Lankan government’s tax revenue is woefully inadequate to cover its debts.

The international rating agency says that Sri Lanka’s new government has taken over a fast-growing economy, but one with a large government debt burden.

Sri Lanka’s government debt is 78 per cent when compared to its Gross National Product (GNP) and 40 per cent of its revenue is spent as interests on loans obtained. Analysts said investors were cautious ahead of Prime Minister Ranil Wickremesinghe's policy statement next month outlining his government's economic priorities ahead of the 2016 budget proposals scheduled to be announced in the third week of November.

Analysts said the government's move to implement a budget proposal relating to a retrospective tax targeting corporates is the main concern for investors.

Turnover stood at 1.2 billion rupees ($8.5 million), compared with this year's daily average of 1.1 billion rupees in the CSE.

 www.island.lk

Renuka Foods buys more of subsidiary

Renuka Foods PLC has subscribed to 125,000 ordinary shares amounting to Rs. 125 million at Rs. 1,000 per share in its subsidiary company Renuka Agri Organics Limited.

Further, its subsidiary company Renuka Organics (Pvt) Limited has also subscribed to 250,000 ordinary shares at Rs. 1,000 per share for a total consideration of Rs. 250 million.

Renuka Foods and Renuka Organics now own 50 per cent and 20 per cent of the issues ordinary shares of Renuka Agri Organics Limited.(IH)
www.dailynews.lk

People's Leasing and Finance to raise Rs 6 b

People's Leasing and Finance has decided to go for Rs.6 billion debenture issue.To this end, the company plans to issue 40 million debentures with an option to issue up to a further 20 million in the event of an over subscription at a par value of Rs.100.

Subscription list will open on November 5, 2015. Joint managers to the issue is People's Bank Investment Unit. (IH)
www.dailynews.lk