Sunday, 10 January 2016

Akbar Brothers now second biggest Alumex shareholder

Akbar Brothers (Pvt) Ltd., Sri Lanka’s biggest tea exporter, has upped its stake of Alumex PLC, a Hayleys subsidiary, to 13.44% from the 9.86% it previously held, Akbar Brothers said in a stock exchange filing.

The increased shareholding was accomplished by Akbar purchasing Alumex shares of 5,357,200 shares each personally held by two of their directors, Messrs. A Akbarally and I. Akbarally at Rs. 17 a share, close to the high of Rs. 17.70 a share achieved in the financial year ended March 31, 2015.
Hayleys own 51% of Alumex and Hayleys Chairman A.M. Pandithage is chairman of the company in which Akbar held one board seat.

Last week’s acquisition by Akbar Brothers made it the second larges shareholder of Alumex displacing the Hirdaramani connected Rosewood (Pvt) Ltd.
www.island.lk

CW Mackie gets time till Dec. 2016 for free float compliance

C.W. Mackie PLC has won time till the end of this year to be compliant with the CSE listing rules requiring a minimum public holding of 15% in the hands of a minimum 500 public shareholders on or before Dec. 31, 2015.

On Dec. 1 last year, the company wrote to the SEC seeking an extension and the SEC, having examined the request in the context of the company’s efforts for increasing the public holding to the required level had granted time till the end of this year to be compliant with the rule, the company said in a stock exchange filing last week.

Right now C.W. Mackie has a public holding of slightly over four million shares (11.17%) in the hands of 2,014 public shareholders.

The top shareholder of C.W. Mackie is Lankem wth 34.09%. Its ultimate controlling interest is the Colombo Fort Land and Buildings Group.
www.island.lk

HDFC confident of concluding ESOP by year-end

The HDFC Bank has expressed confidence that its Employee Share Option Plan established some years ago, now largely subscribed, will be concluded by the end of this year with eight employees entitled to take up 102,668 shares purchasing their entitlements by the year end.
"The HDFC Bank is confident that those remaining eight employees will also purchase their entitlement before Dec. 31, 2016 failing which the Trustee will take steps to sell the remaining shares in the market and windup the ESOP," Mr. K.T.D.D. De Silva, Secretary to the Bank/Board said in a stock exchange filing.

The ESOP was established for the benefit of employees with the approval of the CSE. In terms of the plan, Legaline Trustee Service (Pvt) Ltd., acting as trustee for employees of the HDFC Bank subscribed for 348,552 ordinary shares of Rs. 100 each at Rs. 143 per share by obtaining a finance facility from HDFC Bank.

These shares, with the cost associated thereon, were allocated in favour of the employees on a pre-determined basis. Following the share split, the number of shares increased tenfold to 3,485,520.

Employees were given the option to purchase the shares within a three year period after a one year retention period by paying the cost and interest thereon. Since the employees did not pay for the shares allocated to them within the stipulated time due to market conditions, the scheme was amended with CSE approval to extend the time period till Dec. 31, 2016.

Thereafter, the 253 employees were offered the 3,485,520 shares with the option to pay for their entitlement on the same basis as before Dec. 31, 2016. As of Jan. 7, only 102,668 shares remain for purchase by eight employees, the filing said.

HDFC which did not disclose the price at which employees could take their entitlements expressed confidence that the remaining shares would be taken up.

On Friday the HDFC Bank share closed flat on the CSE at Rs. 65 with 4,350 shares traded between Rs. 64.50 and Rs. 66.50.
www.island.lk

Entrusted with public funds, they failed!

By Duruthu Edirimuni Chandrasekera

CB under fire over collapse of a primary dealer


Entrust was heavily involved in supporting pro Rajapaksa projects like sponsoring the Police rugby team.

Serious questions are being raised as to why early action was not taken against crisis-hit Entrust Securities PLC (Entrust), a primary dealer of the Central Bank (CB), by the regulator when issues relating to mismanagement first came to light more than two years ago in 2013.The close connection between Entrust’s majority owners, the (Anuruddha) Ratwatte family, and the Rajapaksa regime is emerging as one of the possible reasons for CB authorities turning a blind eye to early signs of trouble at the firm.

On Monday, the CB said it was taking over the management of the company to prevent a ‘systemic’ collapse. CB Governor Arjuna Mahendran has said the organisation is believed to be exposed to a liability of Rs. 5 to 6 billion (the amount it owes to investors and others).The firm, part of the failed Ceylinco Group which crashed in 2008 and known at the time as Ceylinco Shriram, is being investigated over various irregularities by the CID and the Police, Mr. Arjuna Mahendran told reporters on Monday. The briefing had been called to explain the regulator’s latest position vis-a-vis Entrust .

Mr. Mahendran said that from 2013 CB had encountered issues at Entrust and the firm was asked to rectify them. Deputy Governor P. Samarasiri said at the same briefing that Entrust was repeatedly asked not ‘to do certain things’ (which they did) and the CB gave them time to submit a re-structuring plan. That deadline ended on Monday at 6 p.m.Last week the Colombo Stock Exchange (CSE) and the capital market regulator, the Securities and Exchange Commission (SEC) wrote to Entrust asking for certain information. On Monday the CB informed the CSE of its take-over decision and this announcement was published on the CSE website..

In October 2015 – as serious signs emerged of a major crisis – Chanuka Ratwatte, son of former deputy minister of defence, the late Anuruddha Ratwatte, resigned from the Entrust Group board. He was chairman and managing director of the group. The organisation has two listed subsidiaries – primary dealer Entrust Securities PLC and Multi Finance PLC, a licensed finance company. What went really wrong at Entrust for the company to be hauled up by the authorities isn’t still clear at this moment. Officials are tight-lipped about the events that led to Monday’s dramatic announcement.

Entrust’s competitors allege that part of the crisis may be linked to the Ceylon Electricity Board (CEB)’s EPF funds going missing, which was some years ago highlighted by the Minister of Power and Energy at the time, Patali Champika Ranawaka. CEB sources said that they had directed Entrust to invest the board’s EPF money worth some Rs. 3 billion in 2009 (during the time Entrust as Ceylinco Shriram was under the Ceylinco Group and that, now, it’s not in CEB’s depository account. Minister Ranawaka, now handling Megapolis development, on Thursday confirmed that this issue is under investigation. “Rs. 3 billion was given to Ceylinco Shriram in 2009. This is now being probed,” he told the Business Times.

Not credible

Industry sources say that the CB appeared to be slow in either recognising the signs that the company was collapsing or in taking action, raising questions of the regulator’s effectiveness to nip in the bud any crisis situation and avert a panic situation. “Primary dealers are the most closely regulated entities of the CB. They are agents of the regulator and need to file tonnes of paperwork with the CB on a regular basis. There can’t be an incident that they cannot find an evidence of transfer and a confirmation (of funds),” an industry official, who doubted the credibility of “funds going missing”, said.

He said that this isn’t plausible because the CB’s Public Debt Department regulates and supervises primary dealers who engage in trading of government securities. Their trading platform is electronic and is a Real-time Gross Settlement System (RTGS), which is a specialist funds transfer system where transfer of money or securities takes place from one bank to another on a “real time” and on “gross” basis. Some dealers also argue that the CB ‘managed’ the situation well in the eventual takeover as there was no panic in the money market and trading has been unaffected.

Entrust’s dealings were ‘surely’ seen by CB officials way before the latest fiasco owing to CB’s rigorous monitoring, the official opined. Other analysts also point to the CB saying that it’s a serious blackmark on the regulator. “The Golden Key (fiasco) wasn’t under the CB at the time of its collapse. So the CB has a leg to stand on. But Entrust was under the CB watch. This doesn’t seem right,” an analyst said. Mr. Mahendran said that investigations are ongoing and if it’s found that the management of this company in particular has misbehaved, they will also be taken to task.

The Business Times’ own investigations revealed that Entrust owners had approached some powerful personalities including some ministers in the new government to sort out their problems. One such minister, it is learnt, had politely declined to assist the group. Entrust Group officials were not available for comment on this matter and all other issues relating to the take-over.The Business Times reliably learns that the CB’s Deposit Insurance Fund – used to bail out troubled companies – is believed to have shrunk to Rs. 2 billion last month from Rs. 6 billion in early 2015 partly due to the regulator lending money to Entrust. CB officials were not available for confirmation on this issue.

The group had powerful contacts with the former regime, helping to sponsor sports events and getting other corporates to also chip in. In many cases, the Business Times learns, some corporates were not paid millions of rupees after providing equipment and other infrastructure at the ‘behest’ of the powers that be – via Entrust.During the tenure of the last government, the company was the sponsor of the Western Warriors rugby team captained by former President Mahinda Rajapaksa’s second son Yoshitha Rajapaksa. The team is owned by Western Sports Management (Pvt) Ltd, a company under the Entrust Group.Western Warriors participated at the Carlton Super Sevens tournament, a sports event organised by Rajapaksa senior’s elder son Namal.

At the time an Entrust official was quoted in the media as saying that that the group expects the Carlton Super Sevens tournament will help inculcate teamwork and fair-play and also create a healthy environment to work with others, paving the way for a better society and an enhanced corporate culture. On Tuesday, the National Savings Bank (NSB) walked into the office and took over the operations of Entrust on a directive of the CB. CB officials accompanied NSB officials to the Entrust office on the 16th floor, West Tower of the World Trade Centre in Colombo, and met senior management including Group Executive Director cum CEO Romesha Senerath, General Manager / Chief Dealer Entrust Securities PLC, Sanjeewa Dayaratne and Assistant General Manager Niroshan Mendis and gave fresh directions on running the company.

A help desk was also set up at the premises by the NSB. Its’ hotline is 011-5500635. With Sri Lanka’s capital markets having a ‘dubious past’ of pumping and dumping of stocks, the NSB bond scandal, etc, the inability of the CB to recognise the ‘early signs’ of a possible crisis even though the regulator has access to the company’s accounts in the Central Depository System has put the CB in the spot.

In the absence of no ‘official’ information being released by the CB apart from the media briefing, one can only surmise that the company collapsed for a variety of reasons including bidding for bonds, treasury bills and other securities far higher than its assets base, which is a violation of the rules. The other theory doing the rounds is that funds of investors were ‘rolled’ (just like the events that led to the Ceylinco example) and used for politically-backed sports events (rugby) among other causes. The trouble came when the company’s political backers were eased out of the scene after Maithripala Sirisena’s surprising entry into the political firmament, ousting his (Maithripala’s) former leader Mahinda Rajapaksa.

How a primary dealer works

When the Central Bank (CB) decides to raise Treasury Bills and Treasury Bonds at the government securities auctions, primary dealers are the only ones authorised to make bids in order to buy these securities. These dealers are agents of CB and are issued a licence to operate. Primary dealers bid at the auctions on behalf of their clients or for themselves.

They offer low interest to CB when buying securities and profit by anticipating interest rate movements, selling at a higher rate.Treasury Bills and Bonds are considered highly stable investments (often described as “zero risk”) because they are based on the stability of the government – simply because the likelihood of government default or overthrow is basically non existent.
www.sundaytimes.lk

Entrust showed Rs.48 mln loss in last reported quarter

Under-fire Entrust, according to its latest financials released to the Colombo Stock Exchange, had reported a net loss of Rs. 48.8 million in the quarter ending 30th September 2015 from a net profit of Rs. 298 million in the same 2014 period. However for the six months ending 30th September 2015, the company reported a profit of Rs. 44.7 million against Rs.380 million (profit) in the 2014 period.

The same report listed the board of directors as Chairman/Executive Director I.D.B. Dissanayake, Executive Director – Chanuka Ratwatte, Group Chief Operating Officer Romesha Senerath (Group Executive Director), Nalin Jayasuriya (Independent Non-Executive Director), G.A.K. Nanayakkara (Independent Non-Executive Director), R.M.S. Tilakawardana (Non-Executive Director) and S. Jeyavarman (Non-Executive Director). Mr. Ratwatte resigned from the board in October 30.

The top three shareholders as at this date were Entrust Holdings Ltd with 86.83 per cent, Entrust Ltd – 1.90 per cent and Ms. E.M.I. Wijeyawickrema – 0.69 per cent while Ms. Senerath was the only director to have shares (0.03 per cent) as per data in the company.
The company’s stated capital as at September 30 was Rs. 220 million. Total Liabilities was Rs. 17 billion. Of this, ‘Other Financials Liabilities’ was Rs. 16.9 billion, and Total Assets Rs. 18.2 billion. Public shareholders numbered 900 with a total of stake of 10.93 per cent. Meanwhile the company’s webpage, www.entrust.lk cannot be accessed. www.sundaytimes.lk