Melstacorp buys slices of Balangoda and Madulsima from related parties

In two related party transactions reported to the Colombo Stock Exchange in Sept. Melstacorp PLC, the Harry Jayawardena controlled holding company of the Distilleries Company of Sri Lanka and substantial stakeholder of several quoted blue chips has purchased large slices of Balangoda and Madulsima Plantations PLC from two other Jayawardena-controlled companies, Stassen Exports and Milford Exports.

However the controlling 93.48% of Madulsima and 58.61% of Balangoda has not changed as the transactions were between related parties, the stock exchange filings said.

Melstacorp purchased approx 16.94 million shares of Madulsima at a price of Rs. 17 per share from Stassen Exports and approx. 3.64 million shares of Balangoda from Milford Exports at Rs. 32 a share.

www.island.lk

Sri Lanka's Siyapatha Finance 5-year bond oversubscribed

ECONOMYNEXT - Siyapatha Finance Plc, a non-bank lender, said its listed 5-year bond issue had been oversubscribed with applications for over 10 million being received and closed on Friday.

The offer of 10 million bonds with a par value of Rs100 to raise a billion rupees opened on September 25, 2017.

The firm last week said the coupon of its bond has been raised to 12.5 percent from 12.0 percent to accommodate tax changes to government and private bonds.

Sri Lanka’s Cargills sells property for Rs4.2bn

ECONOMYNEXT – Sri Lanka’s Cargills (Ceylon) PLC said one of its subsidiaries had sold land worth Rs4.20 billion in the Colombo 2 municipal ward to Vauxhall Land Developments (Private) Ltd.

The sale was made by Cargills fully owned subsidiary Dawson Office Complex (Private) Ltd.

It sold its investment properties at Dawson Street and Vauxhall Street, Colombo 2.

Sri Lankan stocks close at more than 1-wk high

Reuters: Sri Lankan shares edged higher for a second straight session and closed at a more than one-week high on Friday as investors bought beverage and manufacturing shares while continued foreign buying in the market underpinned positive sentiment, brokers said.

The Colombo stock index ended 0.07 percent up at 6,438.24, its highest close since Sept. 21.

The bourse rose 0.2 percent for the week, marking its third straight weekly gain.

Foreign investors bought a net 188 million rupees ($1.23 million) worth of shares on Friday extending the year-to-date net foreign inflow to 18 billion rupees worth of equities.

Turnover stood at 782.3 million rupees, compared with this year’s daily average of about 914.8 million rupees.

“We were expecting margin calls to come in being the month end, but we did not see that,” said Dimantha Mathew, head of research at First Capital Holdings.

“Domestic investor participation was high and they were looking to buy blue chips while foreigners were also active.”

Shares of Lion Brewery Plc gained 5.2 percent, while Sampath Bank Plc advanced 1.8 percent and Richard Pieris Plc rose 3.8 percent.

On Tuesday, the Sri Lankan central bank held its key rates steady, saying past steps were keeping inflation and credit growth under control, as policymakers focus on supporting an economy hit by extreme weather.

($1 = 153.0000 Sri Lankan rupees)

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Fitch maintains rating watch negative on Distilleries Company

LBO - Fitch Ratings has maintained the Rating Watch Negative (RWN) on alcoholic beverage manufacturer Distilleries Company’s (DIST) National Long-Term Rating of ‘AAA(lka)’, as the company takes steps to complete its restructuring exercise and resolve its capital structure, which will require regulatory approval.

Fitch placed Distilleries on Rating Watch Negative in September 2016 to reflect potentially higher financial risks following a group restructuring exercise.

Fitch said it will resolve the Rating Watch Negative once Distilleries obtains the requisite regulatory approval to complete a private share placement to Melstacorp PLC, without which the company will have a negative net asset position.

Fitch further stated that the RWN resolution may take longer than the typical six-month period if regulatory approval is delayed.

Full statement from Fitch Ratings is reproduced below.

KEY RATING DRIVERS

Restructuring Pending Regulatory Approval: Melstacorp, a then closely held subsidiary of DIST, issued new shares to DIST in August 2016 for which DIST paid by way of a LKR24.8 billion promissory note. DIST’s shareholders then swapped their shares for Melstacorp shares on 30 September 2016, making DIST a 99.95% owned subsidiary of Melstacorp. At the same time, DIST wrote-off its erstwhile investment in Melstacorp, leaving a negative net asset position of LKR19 billion on DIST’s balance sheet at 31 December 2016. DIST received an advance of LKR20 billion in January 2017 for which it expects to privately place new shares to Melstacorp. The private placement will be subject to Securities and Exchange Commission approval.

Strong Linkages with Parent: We have assessed DIST on the basis of its parent’s consolidated financial profile because we consider the linkages between DIST and Melstacorp to be strong, as defined in our Parent and Subsidiary Rating Linkage criteria. DIST accounted for 72% of Melstacorp’s consolidated revenue and 85% of its EBITDAR in the financial year to March 2017 (FY17), excluding financial subsidiaries. The two companies also share the same board and DIST had previously provided financial support to weaker group entities in the form of corporate guarantees.

EBITDA Margin to Improve: We expect DIST’s standalone EBITDAR margin to recover to around 25%-30% over FY18-FY21, from around 19% in 1QFY18, as the company adopts better sourcing strategies. We also believe DIST should be able to pass on higher costs stemming from recent indirect-tax hikes; these included the introduction of a 15% VAT and 2% Nation Building Tax from November 2016, the doubling of import duty on ethanol – a key input – to LKR800 per litre in 2016 and sharp excise-tax hikes in 2015, which should not significantly increase for the next year. The group’s EBITDAR margin contracted to 31.1% in FY17, from 33.3% in FY16, mainly due to the contraction in DIST’s standalone EBITDAR margin to 36.5% in FY17 (FY16: 41.4%).

Rating Headroom to Improve: We expect Melstacorp’s consolidated group leverage, measured by net adjusted debt/EBITDAR, excluding financial subsidiaries, to peak at 1.6x in FY18 (FY17: 1.3x) and gradually improve along with a recovery in profit margins. Leverage is high at the group’s telecom subsidiary, Lanka Bell Limited, and plantations subsidiary, Balangoda Plantations PLC. We expect Lanka Bell to continue incurring high capex, although moderating from LKR3.5 billion in FY17, as it continues to expand its 4G coverage. Volatile tea and rubber prices continue to affect the group’s plantations sector.

Leading Alcoholic Beverage Manufacturer: DIST accounts for over 60% of Sri Lanka’s hard liquor production and has been able to maintain its market leadership due to its entrenched DCSL brand and access to a country-wide distribution network. The complete advertising ban on alcoholic beverage products acts as a high entry barrier and further strengthens DIST’s market dominance.

Importance to State Revenue: We expect the alcoholic beverage sectors’ importance to government revenue to mitigate prohibitive regulation that could inhibit the industry’s survival. As such, incremental excise tax increases on hard liquor should be slow, as prices beyond consumer affordability could lower the government’s income. Excise taxes on liquor contributed an estimated 8% to government tax revenue in 2016, with DIST accounting for more than half of this amount.

Acquisitive Nature – Event Risk: We believe the group’s restructure will likely allow management to increase its focus on acquisitions in non-alcoholic beverage segments. The group has historically actively pursued acquisitions and, while it has not indicated it is pursuing specific acquisitions at present, DIST’s rating could come under pressure if there are significant debt-funded acquisitions, particularly those that weaken the group’s overall business risk and increase cash flow volatility.

DERIVATION SUMMARY

DIST is Sri Lanka’s leading alcoholic beverage manufacturer, with a strong portfolio of well-known brands and access to an extensive distribution network. DIST has a smaller operating scale relative to other ‘AAA(lka)’ rated peers, Sri Lanka Telecom PLC (SLT, AAA(lka)/Stable) and Dialog Axiata PLC (AAA(lka)/Stable), because a significant portion of the country’s alcoholic beverage consumption occurs outside the formal sector in which DIST operates. DIST is also exposed to more regulatory risk in the form of recurrent increases in indirect taxation, but these risks are counterbalanced by its substantially stronger free cash flow (FCF). The larger operating scale of SLT and Dialog reflects the size of the local telecom market and the companies’ market leadership in fixed line and mobile, respectively. However, the companies require heavy capex to continue upgrading infrastructure and to service customers, driving negative FCF.

DIST is rated four notches above Lion Brewery (Ceylon) PLC (A+(lka)/Negative), Sri Lanka’s largest beer manufacturer. Lion has a significantly weaker financial profile compared with DIST, with leverage expected to remain above 3x for the next two years. Lion also has a smaller operating scale despite its market leadership in the beer industry, as the industry itself is still small in comparison with the hard liquor market, which DIST dominates. There has also been a shift back towards hard liquor consumption from beer, as higher taxes on beer production have removed the price advantage it previously enjoyed.

KEY ASSUMPTIONS

Fitch’s key assumptions within our rating case for the issuer include:
– Group revenue growth to slow to low single-digits over FY18-FY21 as volume remains stagnant due to high prices (18% in FY17).
– Group EBITDAR margin to contract to 22% in FY18 and recover by around 100bp annually from FY19, as DIST passes on costs.
– Lower excise tax hikes, as the government would be mindful of falling revenue collection if demand were to decline.
– Capex of LKR3 billion annually over FY18-FY21, mainly on account of Lanka Bell as it expands its 4G coverage.
– A group dividend payout of 30% over the forecast period

RATING SENSITIVITIES

Developments that May, Individually or Collectively, Lead to Positive Rating Action
Fitch will resolve the RWN once regulatory approval for the restructuring exercise is obtained. However, the resolution of the RWN could take longer than the typical six-month period if approval is delayed.
Developments that May, Individually or Collectively, Lead to Negative Rating Action
The rating could be downgraded if DIST is unable to obtain necessary regulatory approval.

LIQUIDITY

Comfortable Liquidity Position: The group had a comfortable liquidity position at end-March 2017, with LKR16 billion of unutilised but committed credit lines and LKR2 billion of unrestricted cash available to meet LKR3 billion of term debt maturing in the next 12 months. We expect the group to roll over LKR6 billion of short-term debt, mostly funding the group’s working capital. The group has strong access to local banks due to its position as one of Sri Lanka’s largest corporates and solid credit profile.

Sri Lanka’s Nations Trust Bank to issue listed debt

LBO – Sri Lanka’s Nations Trust Bank is to issue listed rated unsecured subordinated redeemable debentures worth 3.5 billion rupees to meet BASEL III requirements.

The bank said in a stock exchange filing that the Director Board on Wednesday resolved to issue 35,000,000 debentures at 100 rupees each, subject to necessary approvals.

Nations Trust Bank said the debt issue will be quoted on the exchange even though the rates and tenor was not announced.

Sri Lankan stocks close at 1-wk high on foreign buying

Reuters: Sri Lankan shares closed at a one-week high on Thursday, as investors bought banking stocks and continued foreign buying in the market underpinned positive sentiment, brokers said.

The Colombo stock index ended 0.2 percent up at 6,419.47, its highest close since Sept. 21.

Foreign investors bought a net 110.5 million rupees ($721,986) worth of shares on Thursday extending the year-to-date net foreign inflow to 17.8 billion rupees worth of equities.

Turnover stood at 801 million rupees, compared with this year’s daily average of about 915.5 million rupees.

“The market is up on continued foreign buying with healthy turnover levels,” said Hussain Gani, deputy CEO of Softlogic Stockbrokers, adding local retail investors also bought into the market.

Shares of the biggest listed lender Commercial Bank of Ceylon Plc ended 0.6 percent higher, while Lion Brewery Plc rose 6.6 percent, and Melstacorp Ltd ended 1.4 percent firmer.

On Tuesday, the Sri Lankan central bank held its key rates steady, saying past steps were keeping inflation and credit growth under control, as policymakers focus on supporting an economy hit by extreme weather. 

($1 = 153.0500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan stocks hold steady; Ceylon Tobacco falls

Reuters: Sri Lankan stocks ended flat on Wednesday as the gains driven by manufacturing shares were offset by losses mainly in beverage companies.

The Colombo stock index ended 0.12 points weaker at 6,419.47.

Shares of Ceylon Tobacco Company Plc fell 2.9 percent, while biggest listed lender Commercial Bank of Ceylon Plc ended 1.01 percent down.

Richard Pieris Plc rose 14.4 percent and Sri Lanka Telecom Plc ended 2.1 percent firmer.

Turnover stood at 738.3 million rupees ($4.82 million), compared with this year’s daily average of about 916 million rupees.

Analysts said block deals boosted the day’s turnover.

“Block deals on blue chips are continuing,” said Dimantha Mathew, head of research at First Capital Holdings.

“The retail interest on the plantation sector continued, but that does not reflect in the overall index as the contribution is very low.”

Foreign investors bought a net 86.9 million rupees worth of shares on Wednesday extending the year-to-date net foreign inflow to 17.7 billion rupees worth of equities.

On Tuesday, the Sri Lankan central bank held its key rates steady, saying past steps were keeping inflation and credit growth under control, as policymakers focus on supporting an economy hit by extreme weather.

($1 = 153.0500 Sri Lankan rupees)

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Foreigners in Sri Lanka Treasury bonds may not have to pay tax

ECONOMYNEXT - Foreign investors in Sri Lanka's rupee bonds may not have to pay taxes after April 2018, Deputy Central Bank Governor Nandalal Weerasinghe said, amid some uncertainty in markets how a new Inland Revenue law will be interpreted.

Sri Lanka lifted a 10 percent withholding tax government bonds from April 2017 which was earlier paid up front and a tax credit was available for domestic investors.

Deputy Governor Weeresinghe said generally the principle was to tax residents of a country. Taxes are usually paid in the country of residence, he said.

Central Bank Governor Indrajit Coomaraswamy said he understood that authorities were looking at the issue.

Tax experts earlier said foreign investors may have to open tax accounts in Sri Lanka to pay capital gains and income tax.

In general investors from one country who invests in another country with which it has a double taxation agreements can claim tax credits.

Sri Lanka's Anilana Hotels to get cash from Singapore firm

ECONOMYNEXT - Singapore-based Somap International (Pvt) Ltd has agreed to 667 million rupees to Anilana Hotels and Properties, acquiring more than 50 percent of the company, subject to regulatory approvals.

Anilana Hotels said Somap International will buy 513 million shares at 1.30 rupees each, which was higher than the current 493 million shares in issue, the firm said in a stock exchange filing.

Anilana will use 559 million rupees to repay overdue debt and use 108 million as working capital.

The private placement requires approval from Sri Lanka's Securities and Exchange Commission and shareholders, the firm said.

Somap International buys and sells ships for their owners including for demolition and breaking according to its website.

Dockyard wins Sri Lanka LP Gas filling plant deal

ECONOMYNEXT - Sri Lanka's state-run Litro Gas has awarded a 647 million rupee contract to build a liquefied petroleum gas cylinder filling station in a tank farm at Hambatota port.

The cabinet of ministers had approved the award of the deal to Dockyard General Engineering Services (Pvt) Ltd, the state information office said.

The filling plant will serve customers in Hambantota, Ampara, Moneragala, Baticaloa, Badulla and Ratnapura.

Sri Lankan shares edge up from 1-wk low as investors buy blue chips

Reuters: Sri Lankan shares rose on Tuesday for the first time in four sessions, rebounding from a one-week closing low, as investors picked up banking and beverage stocks after the central bank held the policy rates steady.

The Sri Lankan central bank on Tuesday held its key rates steady, saying past steps were keeping inflation and credit growth under control, as policymakers focus on supporting an economy hit by extreme weather.

The Colombo stock index ended 0.12 percent higher at 6,419.61, edging up from its lowest close since Sept. 18 hit on Monday.

Shares of People Leasing Plc rose 2.9 percent, while conglomerate John Keells Holdings Plc ended 0.4 percent firmer, and biggest listed lender Commercial Bank of Ceylon Plc ended 0.7 percent up.

“It was a bit of a slow day with some foreign outflow,” said Dimantha Mathew, head of research at First Capital Holdings.

“High local interest in plantation sector and some block deals in blue chips were seen as a positive sign. Foreigners are inactive and global funds are shifting towards U.S. expecting a possible fed rate hike in December.”

Turnover stood at 532.3 million rupees ($3.48 million), compared with this year’s daily average of about 917 million rupees.

Foreign investors who bought a net 17.6 billion rupees worth of equities so far this year were net sellers for the second straight session. They sold 54.2 million rupees worth of shares on Tuesday. 

($1 = 152.9500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lanka Monetary Policy Review – September 2017 - Policy rates Unchanged

Monetary Policy Review: No. 6 – 2017

Considering developments and outlook in the domestic and international macroeconomic environment, the Monetary Board, at its meeting held on 25 September 2017, was of the view that the current monetary policy stance is appropriate and decided to maintain the policy interest rates of the Central Bank of Sri Lanka at their present levels.

Given below are the key factors that the Monetary Board considered in arriving at the decision.

According to the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy expanded at the moderate pace of 4.0 per cent, year-on-year, in the second quarter of 2017, in comparison to 3.8 per cent year-on-year growth in the first quarter of 2017. Economic growth continued to be affected by extreme weather conditions and weak external demand. In terms of value addition, key growth drivers in the first half of the year were construction, mining and quarrying, financial service activities, and wholesale and retail trade. Although disruptions to near term growth prospects continue, forward looking indicators show improved medium term prospects, which are likely to be realised with the envisaged structural reforms and expected inflows of foreign investments.

Headline inflation based on both Colombo Consumer Price Index (CCPI, 2013=100) and National Consumer Price Index (NCPI, 2013=100) increased in August 2017, reflecting the base effect of tax revisions as well as higher prices of food items. Core inflation, based on both CCPI and NCPI also recorded an uptick in August 2017. Nevertheless, projections indicate that inflation will revert to the envisaged mid-single digit levels by end 2017 and stabilise thereafter, underpinned by tight monetary conditions that have been in place from the beginning of 2016.

The growth of credit extended to the private sector by commercial banks has shown a gradual deceleration since July 2016, responding to the prevailing high nominal and real interest rates in the domestic market. So far during the year, net credit extended to the government (NCG) by the Central Bank has declined sharply, although NCG by the banking sector has been high. A moderate expansion of credit to public corporations has also been observed during the year. However, the expansion in the net foreign assets (NFA) of the banking sector, as a result of the buildup of NFA of the Central Bank and the reduction in foreign liabilities of commercial banks, caused broad money (M2b) growth to remain at elevated levels. Meanwhile, deposit and lending rates appear to have stabilised, partly in response to the recent decline in yields on government securities.

In the external sector, earnings from exports maintained its positive growth for the fifth consecutive month in July 2017. However, the cumulative trade deficit widened in July 2017 as a result of the rise in import expenditure, partly attributed to weather related disruptions to power generation and food production. Tourist arrivals and associated foreign exchange inflows grew on a cumulative basis. Workers’ remittances also increased in July 2017, although declining on a cumulative basis during the year owing to sluggish economic performance and geo-political uncertainties in the Middle East. The rupee denominated government securities market and the Colombo Stock Exchange (CSE) continued to attract foreign inflows. Amidst these developments, the Central Bank cumulative purchases of foreign exchange from the domestic market exceeded US dollars 1.1 billion on a net basis, and gross official reserves improved to around US dollars 7.3 billion by 21 September 2017 from US dollars 6.0 billion at end 2016. With increased flexibility in the determination of the exchange rate, the pressure in the domestic foreign exchange market has eased considerably, resulting in a cumulative depreciation of the Sri Lankan Rupee against the US dollar by 2.0 per cent up to 22 September 2017, in comparison to the depreciation of 3.8 per cent observed in 2016.

In view of the above, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 7.25 per cent and 8.75 per cent, respectively.

The release of the next regular statement on monetary policy will be on 07 November 2017.

Sri Lankan shares fall to one-week low as blue chips decline

Reuters: Sri Lankan stocks fell for a third straight session on Monday to a one-week closing low as investors sold shares in market heavyweights ahead of the central bank’s policy rate decision.

Sri Lanka’s central bank is expected to keep its key interest rates steady on Tuesday, a Reuters poll showed, to support a stuttering economy even as inflation accelerates amid strong credit growth.

The Colombo stock index ended 0.24 percent weaker at 6,412.07, its lowest close since Sept. 18.

Shares of Nestle Lanka Plc fell 0.9 percent, while conglomerate John Keells Holdings Plc ended 0.6 percent weaker, and Browns Investments Plc dropped 3.1 percent.

“Most of the investors are on the sidelines awaiting the policy rates decision,” said Hussain Gani, deputy CEO of Softlogic Stockbrokers.

Turnover stood at 793.9 million rupees ($5.19 million), compared with this year’s daily average of about 919 million rupees.

Foreign investors who bought a net 17.7 billion rupees worth of equities so far this year turned net sellers for the first time in six sessions. They sold 59.2 million rupees worth of shares on Monday. 

($1 = 152.9500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Aitken Spence sells Hill Top Kandy for Rs 740 mn

Aitken Spence has notified the Stock Market that they were divesting Hotel Hilltop Kandy (MPS Hotels) for Rs. 740 million.

It was speculated that an entrepreneur with an active political back ground and owns hotels has purchased this property. The Hotel Hill Top offers two star plus accommodation in Kandy and has 73 standard rooms and one deluxe room.
www.dailynews.lk

Brand new car registration down in August

Brand new motor car registration in August has declined by 4% against July in August month on month.

According to J. B. Security’s monthly report medium car segment share improved from 2.9% to 3.4%. Financing share for large cars dropped from 55% to 30%. Financing share for medium cars dropped from 57% to 45% and financing share for small cars decreased from 58% to 55%. Overall financing share for brand new motor cars decreased from 58.4% to 53.6%.

Meanwhile Pre-owned motor cars increased by 5.6% MoM and 78% YoY. Toyota and Suziki observed growth in pre-owned registrations. Small car segment share increased from 46% to 50%. Overall premium cars have improved from 62 in July to 80 in August. Brand new premium cars gained momentum with BMW leading the way with growth observed in the 5-series.

Overall Brand-new SUV’s increased by 40% MoM and 29% YoY, while Pre-owned SUV’s increased by 9% MoM and 51% YoY. Brand new Hybrids increased by 40% MoM, pre-owned hybrids increased by 4% MoM

Vans declined by 15% MoM and 12% YoY. Mini vans dropped from 628 to 616 registrations. Overall financing share marginally decreased from 73.2% to 72.8%. Meanwhile the despite several efforts to discourage the use the 3-wheelers this segment observed an increase by 17% MoM.

The 2-wheelers registered 29,579 in August, a 3.2% drop MoM and 1.2%YoY increase. 130cc segment share dropped from 80.8% to 79.9%. Overall financing share improved marginally to 72.1% from 71.2%. Pickups saw an improved in growth of 12% MoM.

Brand new mini trucks witnessed growth of 4 % MoM and a drop of 85% YoY. Overall financing share declined from 88% to 87%. Light trucks registrations declined marginally from last month. Brand new light trucks observed a 66% YoY decline. Heavy trucks declined by 6% MoM and 0.7% YoY. Lanka Ashok Leyland’s market share dropped from 41% to 35%. Overall financing share increased from 81% to 93%.

Buses grew by 32% MoM and declined by 5% YoY. Lanka Ashok Leyland witnessed a growth of 24%. Overall financing share increased from 7% to 32%.

www.dailynews.lk

Asset-rich Colonial’s pay Rs. 6 per share dividend despite Rs. 165 mn. loss

CM Holdings PLC (previously Colonial Motors which was founded 105 years ago) has declared a first and final dividend of six rupees a share for the year ended March 31, 2017, despite an after-tax group loss of Rs. 165 million, up from a loss of Rs. 102 million the previous year.

At company level there was a loss of Rs. 110 million against a profit of Rs. 199 million a year earlier.

The company’s chairman, Mr. A. Rajaratnam has attributed the loss "to lower margins, impairment of long term equity investments and reduced dividend income."

The year saw the group revenue grow 129% to Rs. 4.4 billion, he said.

CM Holdings Group owns a valuable quoted share portfolio with a market value of Rs. 655.7 million against a cost of Rs. 208 million. Of this Rs. 611.1 million (cost Rs. 184.7 million) belongs to the company.

"The investments of your company, apart from those in the subsidiary, are of a long term nature and is vulnerable to price fluctuation in the short term," Rajaratnam has told shareholders in his chairman’s review.

The company is also into the automobile business importing KIA and Mazda vehicles with a Union Place showroom. It also owns valuable Union Place real estate with the chairman saying they had plans to increase revenue streams by maximizing currently available rentable space there.

Rajaratnam said the automobile industry had a challenging year due to government policy on the import of vehicles and duty structures. Changes in the minimum down payment on vehicle leasing further aggravated the problem. The group’s motor segment was hit under these conditions with lower margins and limiting of the marketable range of its vehicles.

However their subsidiary, Colonial Motors (Ceylon) Ltd. had been appointed the authorized importer and distributor of Vespa and Aprilia motorbikes in Sri Lanka adding to its product range. The management believes that the new range will be commercially successful and two showrooms have been opened in Union Place and Peliyagoda for the distribution of these vehicles.

CM Holdings with a stated capital of Rs. 288.39 million had total group assets of Rs. 4.88 billion and liabilities of Rs. 1.16 billion. Available for sale financial assets were Rs. 835.8 million.

Net asset value per share for the company was Rs. 108, down from Rs. 121 the previous year. The share traded at a high of Rs. 104 and a low of Rs. 69 closing at Rs. 74.90 during the year under review against a trading range of Rs. 158 to Rs. 82.60 closing at Rs. 90 a year earlier.

The Colombo Fort Land and Building Company with 63.49% is the controlling shareholder with all other individual holdings below 3%. The Sri Lanka Insurance Corporation’s life fund with 2.58% is the second biggest shareholder.

www.island.lk

Tangerine Beach boosts revenue and profits

Tangerine Beach Hotels PLC, the second seafront property built by entrepreneur George Ondaatjie, has modestly improved performance in the year ended March 31, 2017 boosting revenue 6% to Rs. 631.3 million and after tax profit 2% to Rs. 105.7 million with the owning company maintaining the 50 cents per share dividend level of the previous year, the company’s annual report reveals.

Ondaatjie built Tangerine on the Kalutara coast over three decades ago, naming the hotel after his three children (Gerard, Angeline and Travice), after the phenomenal success of his Nilaveli Beach Hotel near Trincomalee. He thereafter built Royal Palms Beach Hotel PLC, in a site adjoining Tangerine, on land acquired at the time the original property was purchased.

The successful hotelier and finance company (Mercantile Finance and Investment PLC) founder, now retired also controls Nuwara Eliya Hotels PLC, owners of the Grand Hotel. His group recently added a city property, unquoted Fairlawn Hotel in Wellawatte.

Writing the chairman’s message on behalf of her father, Ms. Angeline Ondaatjie reported that the year had seen the tourism industry facing increasing challenges on multiple fronts due to negative global and domestic factors.

"The tourism arrivals to Sri Lanka from China, India and the Middle East dominated the statistics as the traditional European influx decreased due to their burdens with economic/political and terrorism issues," she noted.

"The negative impact thus turned in lower volumes and deprived the industry of much needed revenue."

However, Tangerine had been able to record an "impressive" operating profit of Rs. 80 million and a net profit of Rs. 105.6 million. She expressed confidence in the long term prospects of Tangerine saying they were working closely with a number of local travel agents and foreign tour operators seeking contracts.

"We are expecting robust international arrivals growth in Sri Lanka in the coming years," she said. "The growth is a result of the government’s strategy to diversify our source markets while at the same time continuing to develop our traditional European market."

Tangerine Beach has a strong balance sheet with total assets of Rs. 3.34 billion, against total liabilities of Rs. 238.46 million on a stated capital of Rs. 244.8 million. The company carries over a billion rupees in retained earnings and a revaluation reserve of Rs. 1.8 billion in its books.

Earnings per share for the year under review were up to Rs. 5.28 from Rs. 5.19 the previous year while net assets per share grew to Rs. 155.14 from Rs. 150.35. The Tangerine share traded at a high of Rs. 74 and a low of Rs. 50.10 during the year closing at Rs. 59.50. This compared with a trading range of Rs. 50 to Rs. 90 closing Rs. 66.70 a year earlier.

Nilaveli Beach Hotels and Mercantile Investments and Finance, two Ondaatjie companies with 26.68% and 19.5% respectively, top the shareholders list with the Ondaatjie family members also holding large personal stakes. The EPF (8.15%) is the biggest unrelated shareholder.

The directors of the company are: Deshabandu George Ondaatjie (Chairman and Jt. MD), Ms. AM Ondaatjie (Jt. MD), GG Ondaatjie, TJ Ondaatjie, Ms. CA Ondaatjie, Ms. SD de Silva (deceased 4.3.17), NHV Perera, LH Jayasinghe and PHR Casie Chitty.

www.island.lk

LOLC claims to be top listed profit earner, but pays no dividend

Lanka Orix Leasing Company PLC which describes itself as the country’s "largest non-banking financial institution and one of the biggest diversified conglomerates in Sri Lanka" has posted an after tax group profit of Rs. 21 billion in the year ended March 31, 2017 up 124% over the previous year, but has declared no dividend to its shareholders.

This was raised at the company’s annual general meeting last week when LOLC Deputy Chairman Ishara Nanayakkara chairing the meeting explained that their’s was a rapidly expanding group which needed cash to fund growth. He pointed out that the company’s share price had nearly doubled since last year and indicated, in response to a shareholders suggestion, that the possibility of a scrip dividend would be explored.

In a review of the company’s business for the year in its annual report, Nanayakkara said: "It gives me great pleasure to share with you this exceptional performance which saw the LOLC Group achieve the highest profit among listed entities in Sri Lanka."

LOLC last paid a dividend of 50 cents per share in 2013. Prior to that, it had paid dividends of 23 and 28 cents per share in 2008 and 2009. Its net asset value per share had grown from Rs. 10.02 in 2008 to Rs. 98.89 in the year under review.

The company’s stellar performance during the year had once again been spearheaded by its financial services segment which had contributed 81% of the profit despite a challenging year on the macroeconomic front, Nanayakkara said.

The group portfolio includes leisure, plantations, agri-inputs renewable energy, construction, manufacturing and trading among others. The report said that the group footprint in Sri Lanka spans every district from the rural hinterland to major cities and it has ventured offshore to Cambodia, Myanmar and Pakistan in microfinance and is entering the leisure sector in the Maldives.

Brown and Co. PLC is a subsidiary of LOLC.

Its Japanese partner, the Orix Corporation, owns 30% of the company and is represented in the board by Japanese directors. The largest single shareholder of the company is the late Mr. R.M. Nanayakkara who owned 36.3% of the company and tops the shareholders list.

His children, Ishra Nanayakkara (12.6%) and Mrs. Kalsha Amarasinghe (5%) and wife, Mrs. I. Nanayakkara (0.6%) are also among the top 20 shareholders. The EPF is No. 5 on the list with 3.60%.

There were 3,151 shareholders on the register at the close of the last financial year.

With a stated capital of Rs. 475.2 million, the LOLC Group had total assets of Rs. 640.9 billion (company Rs. 102 billion) and total liabilities of Rs. 538.3 billion (company Rs. 55 billion) at the close of the last financial year.

The companies share traded at a high of Rs. 93 and a low of Rs. 59 during the year under review closing at Rs. 61. This compared with a trading range of Rs. 116.20 to Rs. 64.10 closing at Rs. 72 a year earlier. It is now trading at around Rs. 125.

The directors of the company are Messrs. IC Nanayakkara, WDK Jayawardena, MDD Pieris, RA Fernando, Mrs. KU Amarasinghe, H. Nishio and H. Yamaguchi.

www.island.lk

Dhammika to take personal stake in Singer Sri Lanka

First call on mandatory issue acceptances for him

Colombo business tycoon Dhammika Perera, owning slightly over 50% of the Hayleys conglomerate, will be taking up a personal stake in Singer Sri Lanka PLC of which Hayleys took control earlier this month by acquiring approx. 61.73% from its Dutch holding company.

In a mandatory offer document published last week and due to reach Singer shareholders later this week, Hayleys together with its subsidiaries, Volanka and Carbotels, offered the same Rs. 47 per share price to all other shareholders looking to sell.

The document said that based on acceptances received from Singer shareholders, allocations will firstly be made to Mr. Dhammika Perera, next to Hayleys Advantis, thirdly to Hayleys Agricultural Holdings, fourth to Hayleys Aventura and lastly to Hayleys.

This would mean that Perera, who is joint chairman of Hayleys will have first call on the Singer shares that become available through the mandatory offer. It was not indicated how many he would take.

Singer’s Dutch parent, Retail Holdings (Sri Lanka) BV will continue to hold 9.47% of its original holding for 12 – 15 months when Hayleys have agreed to take up those shares either by itself or through nominees at the Rs. 47 per share price.

Singer Sri Lanka has been trading on the floor of the CSE at price levels of Rs. 45 – 46 but below the Rs. 47 price that will be available to shareholders once the process is concluded in the next few weeks. Those accepting the offer will not have to pay brokerage and other transaction charges they would have to meet if they sell on the secondary market.

Brokers said that while no large volumes of Singer had been transacted on the trading floor since the Sept. 15 takeover of control, there have been some transactions at below the mandatory offer price.

The Hayleys share has declined from the Rs. 280 price it commanded the day before the Singer deal was struck to Rs. 274.50 last Friday.

www.island.lk

Sri Lankan shares end lower on selling in blue chips, banks

Reuters: Sri Lankan shares fell for a second straight session on Friday, as investors sold diversified and banking shares in thin trade that saw turnover slumping to a near four-week low.

The Colombo stock index ended 0.38 percent weaker at 6,427.26, off its highest close since Aug. 14 hit on Wednesday. It however gained 0.4 percent on week, a second straight weekly gain.

Shares of conglomerate John Keells Holdings Plc fell 1.5 percent, while biggest listed lender Commercial Bank of Ceylon Plc ended 1.4 percent weaker.

Cargills (Ceylon) Plc dropped 3.5 percent, while Ceylon Tobacco Company Plc ended 0.5 percent lower.

“It was a very dull day. Investors are adopting a wait-and-see approach ahead of the policy rate decision (by the central bank),” said Hussain Gani, deputy CEO of Softlogic Stockbrokers.

Sri Lanka’s central bank is expected to keep key rates steady on Tuesday, a Reuters poll showed, to support a stuttering economy even as inflation accelerates amid strong credit growth.

Turnover stood at 217.9 million rupees ($1.43 million), compared with this year’s daily average of around 920 million rupees.

Foreign investors bought a net 31.1 million rupees (about $203,667) worth of shares, extending the year-to-date net foreign inflow to 17.7 billion rupees. 

($1 = 152.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

SEC chief to leave his job with unfinished work

By Sanath Nanayakkare

Thilak Karunaratne, Chairman of Securities and Exchange Commission of Sri Lanka (SEC) would be able to write an autobiography not only on entrepreneurship and membership in the Legislature but also on his commitment to the regulatory responsibility at the SEC that has consummated his life's work.

However, come mid-January 2018, Karunaratne is going to leave his job at the SEC with unfinished work – most of which – he initiated himself.

It's true that his term ends in mid January 2018, but the list of unfinished work is significant given the circumstances in which the SEC has not even been able to find 'quality personnel' to fill its management positions (this was admitted by the chairman himself) let alone find a suitable chairman to deal with the gaping holes in the existing regulatory system of Sri Lanka's Capital Market.

If one followed the two-day IOSCO (International Organization of Securities Commissions) and SEC forum held in Colombo held on September  20-21, it would be apparent how much work there’s yet to be done to raise liquidity in Sri Lanka's Capital Market to make it attractive to foreign investors.

Apart from that, highly relevant initiatives such as developing sustainable market-based financing for SMEs, rapid developments in innovation and new technologies to achieve greater financial inclusion and growth on par with emerging markets, assurance of robust regulatory frameworks to penalize bad behaviour of errant stock market dealers and addressing the growing need for cybersecurity are just being embarked upon.

Further, the much touted Securities Exchange Bill 2017 which intends to amend and consolidate the law relating to the securities market will not be taken up in parliament until after the Budget debate, which will be followed by the parliament vacation, and eventually when the parliament takes up the Securities Exchange Bill in January 2018, the SEC chief will have vacated his post.

This unfolding scenario can be summed up in a few words. "The SEC Chairman will be quitting his job before the useful work in progress is completed to a reasonable extent".

www.island.lk

Sri Lankan shares end steady near 5-week closing high

Reuters: Sri Lankan shares ended flat on Thursday, near a more than five-week closing high hit in the previous session, as gains in beverage and construction shares were offset by losses in bank stocks.

The Colombo stock index ended 0.02 percent lower at 6,451.55, edging down from its highest close since Aug. 14 hit on Wednesday.

“The interest in blue chips is continuing with buying momentum and positive sentiment, even though the market ended flat,” said Dimantha Mathew, head of research at First Capital Holdings.

“Unlike dull periods, we now see block trades and there are continuous enquiries specially from foreigners.”

Shares of biggest listed lender Commercial Bank of Ceylon Plc ended 0.6 percent weaker, while Hemas Holdings Plc fell 0.8 percent.

Shares in Ceylon Tobacco Company Plc rose 0.5 percent and Access Engineering Plc rose 3.2 percent.

Foreign investors bought a net 54.1 million rupees ($354,289) worth of shares, extending the year-to-date net foreign inflow to 17.7 billion rupees.

Turnover stood at 541.4 million rupees, less than this year’s daily average of around 924 million rupees. 

($1 = 152.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Sri Lanka 01-year Treasuries yield falls to 9.10-pct

ECONOMYNEXT – Sri Lankan treasury bill yields fell at an auction Wednesday, the public debt department of the Central Bank said.

It said in a statement that the 06-month Treasury Bill yield fell 11 basis points to 8.94 percent from 9.05 percent last week.

The one-year Treasury Bill yield fell 10 basis points to 9.10 percent at the auction from 9.20 percent last week. The 03-month bill was not offered.

The public debt department got Rs65 billion worth of bids and accepted bids of Rs22 billion.

Singer Sri Lanka rating unaffected by shareholder change - Fitch

Fitch Ratings says Hayleys PLC’s acquisition of a controlling stake in Singer (Sri Lanka) PLC (Singer, A-(lka)/Stable) is neutral for Singer’s rating.

This is because Hayleys’ balance sheet will be stretched significantly following the completion of the Singer acquisition despite Hayleys’ stronger business risk profile as the purchase is likely to be largely funded by debt and existing cash.

In Fitch’s view, this is likely to limit Hayleys’ ability to provide extraordinary support to Singer if required, especially given the size of Singer’s own balance sheet and its significant debt.

On September 15, Hayleys purchased a 61.73% stake in Singer from its main shareholder Retail Holdings (Sri Lanka) BV for Rs 10.9 billion.

Retail Holdings will retain a stake of 9.47% for the time being while Hayleys will make a mandatory offer as required by local regulations to purchase the remaining 28.8% of Singer.

Fitch estimates that following Hayleys’ acquisition of the 61.73% of Singer, Hayleys’ consolidated lease-adjusted debt net of cash/operating EBITDAR of 3.9x as at end-March 2017 (FY17) will increase to 5.8x, all else remaining equal.

Hayleys’ leverage could increase further depending on the use of more debt to fund the remaining stake in Singer following the completion of the mandatory offer. Fitch estimates that Hayleys’ financial flexibility will be stretched even further at the stand-alone company level through which a bulk of the investment in Singer will be made.

With the acquisition, Singer, the biggest consumer-durable retailer in the country, will become Hayleys’ largest subsidiary, contributing an estimated 23% of the Hayleys group’s post-acquisition pro-forma consolidated EBITDA.

Hayleys’ other significant operating segments include transportation and logistics, purification and agriculture, whose contribution to Hayleys’ post-acquisition pro-forma consolidated EBITDA will drop to approximately 13%, 11% and 10%, respectively, according to Fitch’s estimates, with all else being equal.
www.dailynews.lk

Fitch affirms Alliance Finance at BB+(lka); withdraws ratings

Fitch Ratings on Tuesday affirmed Alliance Finance Company PLC’s (AFC) National Long-Term Rating and the ratings on its outstanding senior unsecured debentures at ‘BB+(lka)’.

The Outlook on the National Long-Term Rating is Stable. Fitch has also affirmed AFC’s outstanding subordinated debentures at ‘BB(lka)’.

At the same time, Fitch has withdrawn all the ratings of AFC because they have been taken private.
www.dailynews.lk

Sri Lankan shares hit over 5-wk closing high on foreign buying

Reuters: Sri Lankan shares gained for a fifth straight session on Wednesday to hit a more than five-week closing high as foreign investors bought into blue-chips, boosting sentiment.

Foreign investors bought a net 556.6 million rupees ($3.64 million) worth of shares, extending the year-to-date net foreign inflow to 17.7 billion rupees.

The Colombo stock index ended up 0.39 percent at 6,452.91, its highest close since Aug. 14.

“We have seen major transactions in blue chips which drive the market these days,” said Dimantha Mathew, head of research at First Capital Holdings.

“Foreigners are active and they are taking positions while the locals are a bit silent. But we can see them also slowly returning to market with high foreign activities.”

Shares of Dialog Axiata Plc rose 4.3 percent, while the biggest listed lender Commercial Bank of Ceylon Plc ended 2.9 percent firmer.

Melstacrop Ltd rose 3.4 percent, while conglomerate John Keells Holdings Plc gained 0.2 percent.

Turnover stood at 1.6 billion rupees, well above this year’s daily average of around 926.2 million rupees. 

($1 = 152.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

LB Finance’s Senior and Subordinated Debt rated

Fitch Ratings has assigned LB Finance PLC's (LB; A-(lka)/Stable) proposed senior unsecured and subordinated debentures expected National Long-Term Ratings of 'A-(lka)(EXP)' and 'BBB+(lka)(EXP)' respectively.

The issuance is to total LKR3 billion, with the debentures to mature in five years and carry fixed coupons. The debentures are to be listed on the Colombo Stock Exchange. LB expects to use the proceeds to fund loan book growth, reduce asset and liability maturity mismatches and to improve its Tier II capital base.

The final ratings on the debentures are subject to the receipt of final documentation conforming to information already received.

The proposed senior debentures are rated at the same level as LB's National Long-Term Rating as they constitute unsecured and unsubordinated obligations of the company. The proposed subordinated debentures are rated one notch below its National Long-Term Rating to reflect the subordination to its senior unsecured obligations.

The rating of LB captures its established franchise, and satisfactory levels of capital, which are supported by sound profitability through its higher-yielding products.

These are counterbalanced by its relatively higher risk appetite as seen from its exposure to gold-backed lending. The rating also reflects increasing liquidity risk, which could reduce its liquidity buffer.

The ratings on the proposed debentures will move in tandem with LB's National Long-Term Rating.

www.island.lk

Fitch rates Sampath Bank’s Basel III sub debt ‘A (lka) (EXP)’

Fitch Ratings has assigned Sampath Bank PLC’s (A+(lka)/Negative) proposed Basel III compliant subordinated debentures an expected National Long-Term Rating of ‘A(lka)(EXP)’.

The notes, the first Basel III compliant subordinated debt in Sri Lanka, will total Rs 6 billion, mature in five years and carry fixed coupons. The notes include a non-viability clause and will qualify as regulatory Tier II capital for the bank. The bank plans to use the proceeds to support its loan book expansion and to strengthen its Tier II capital base. The debentures are to be listed on the Colombo Stock Exchange.

The final rating is subject to the receipt of final documentation conforming to information already received.
www.dailynews.lk

Lankan equities still attractive amid foreign outflow blip

Bloomberg: The biggest single-day outflow in at least 11 years from Sri Lankan stocks is a blip and foreigners, the key drivers of the nation’s equities this year, will likely overlook the negative reading.

Retail Holdings Sri Lanka BV on Wednesday agreed to sell its 61.73% stake in Singer Sri Lanka, a maker of sewing machines, to Hayleys Plc for about $ 71 million. A matching outflow was reported by the exchange on Friday.

“This is a one-off deal that has nothing to do with inflows,” said Sanjeewa Fernando, strategist at CT CLSA Securities in Colombo. “We have to adjust for this outflow.”

Foreigners have been buyers of Sri Lankan stocks for seven straight months through August, the longest streak since May 2015, drawn by the growth in company earnings and renewed confidence in the Government’s policies. The nation’s benchmark equity index trades at 10 times one-year forward earnings, versus a multiple of 15 for the MSCI Frontier Emerging Markets Index.

“Our price-to-earnings is still about the cheapest,” Fernando said. “Until we reach valuation of 14 times, foreigners are likely to transfer some of their funds from pricier markets.”
www.ft.lk

Sri Lankan shares mark 4-wk closing high on foreign buying

Reuters: Sri Lankan shares gained for a fourth straight session on Tuesday to mark a four-week closing high on foreign buying in blue-chips.

Foreign investors bought a net 129.9 million rupees ($848,188) worth of shares on Tuesday, extending the year-to-date net foreign inflow to 17.1 billion rupees.

The Colombo stock index ended up 0.29 percent at 6,428.07, its highest close since Aug. 18.

“Foreign investors were active today, helping to push the turnover above one billion. Foreign interest were buying blue-chips and that helped boost local investor confidence,” said Hussain Gani, deputy CEO of Softlogic Stockbrokers.

Shares of Ceylon Cold Stores Plc rose 1.5 percent, while Trans Asia Hotel Plc ended 6.7 percent firmer and conglomerate John Keells Holdings Plc gained 0.2 percent.

Turnover stood at 1.6 billion rupees, well above this year’s daily average of around 922.4 million rupees.

Recent block deals also helped boost sentiment, traders said.

Last Wednesday, after market hours, diversified conglomerate Hayleys Plc said it had agreed to purchase 61.73 percent of Singer Sri Lanka Plc for 10.9 billion rupees from Retail Holdings (Sri Lanka) BV a subsidiary of Retail Holdings NV.

Hayleys in a corporate disclosure said on Friday that Hayleys Plc and its subsidiaries purchased 231.9 million shares or 61.73 percent of Singer Sri Lanka Plc at a price of 47 rupees per share.

Last week, top mobile phone operator Dialog Axiata Plc said it acquired 80.34 percent of Colombo Trust Finance Plc for 1.072 billion rupees ($7 million). 

($1 = 153.1500 Sri Lankan rupees) 

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

Mercantile Investments and Finance records PAT of Rs 202 mn for 2016-17

Mercantile Investments and Finance has recorded a steady pre-tax profit of Rs 314 million and a post- tax profit of Rs 202 million for the financial year ending March 31, 2017.

However both pre and post-tax profits reported a notable decline of 61% and 60% respectively, when compared with the previous year mainly on account of recording impairment charges.

Further, as witnessed across the finance industry, the continued upward movement in interest rates and its resulting re-pricing effect impacted the cost of funding and core business margins which pegged back profitability levels against what was envisaged, Mercantile Investments and Finance Chairman Saro Weerasuriya told shareholders in company’s Annual Report for the financial year 2016/17.

“We experienced steady growth in our lending volumes which resulted in the loan book growing buoyantly by 14% year-on-year. In contrast, the deposit base grew moderately increasing by 8% year-on-year.

In the backdrop of rising market interest rates, we were conservative in the mobilisation of deposits that were deemed relatively more costly than other sources of funding available, and hence, we were able to access less costly sources of funding through borrowings on the strength of our brand.”
www.dailynews.lk

Sri Lankan shares hit 3-week closing high as blue chips gain

Reuters: Sri Lankan shares rose for a third straight session on Monday and ended at a three-week closing high as investors picked up diversified and telecom shares, brokers said.

The Colombo stock index ended 0.12 percent firmer at 6,409.65, its highest close since Aug.28.

The bourse rose 0.4 percent last week, ending an eight-week long losing streak.

“We are yet to see the bullish trend, but it is slowly coming into the market with some foreign buying,” said Dimantha Mathew, head of research, First Capital Holdings.

“The Locals are a bit more conservative and are looking at only blue chips yet.”

Shares of conglomerate John Keells Holdings Plc gain 1.2 percent while Sri Lanka Telecom Plc ended 4.6 percent firmer, Melstacorp Ltd rose 1.7 percent and Dialog Axiata Plc ended 0.9 percent higher.

Foreign investors net bought 97.7 billion rupees worth of shares on Monday, extending the year-to-date net foreign inflow to 17 billion rupees worth of equities.

Turnover stood at 459.2 million rupees, half of this year’s daily average of around 918.3 million rupees.

According to traders, recent block deals also helped boost the market sentiment.

On Wednesday after market hours, diversified conglomerate Hayleys Plc said it had agreed to purchase 61.73 percent of Singer Sri Lanka Plc for 10.9 billion rupees from Retail Holdings (Sri Lanka) BV a subsidiary of Retail Holdings NV.

Hayleys in a corporate disclosure said on Friday that Hayleys Plc and its subsidiaries purchased 231.9 million shares or 61.73 percent of Singer Sri Lanka Plc at a price of 47 rupees per share.

Last week, top mobile phone operator Dialog Axiata Plc said that it acquired 80.34 percent of Colombo Trust Finance Plc for 1.072 billion rupees ($7 million). 

($1 = 152.9500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)

Lanka Cement’s affairs in a mess,7 annual reports presented together

Over Rs. 2.3 bn. retained losses, lease on 92-acre factory land not renewed

Lanka Cement PLC has published its annual report for 2016 to be considered by shareholders at its 23rd Annual General Meeting as well as a second volume comprising annual reports for the years 2010 to 2015 (inclusive) to be considered at what is described as a 23rd Extraordinary General Meeting.

Although the affairs of the company, which has been importing and selling cement since its Kankesanturai factory was closed in 1991, is in a mess and auditors have declined to express an opinion on its accounts, its shares continue to be traded on the Colombo Stock Exchange.

On Thursday over 0.7 million shares of the company were transacted at a low of Rs. 4.10 and a high of Rs. 4.50 closing at Rs. 4.40 in 20 trades.

The company’s present chairman, Mr. Lalinda Liyanage, has said in the latest annual report that Lanka Cement had a great history and the successes and failures of the domestic cement industry could be understood in reviewing this history.

He said their factory was located on 92.8 acres of land granted by a 30-year government lease which ended May 30, 2014. But neither the Lanka Cement board nor its management had acted to renew the lease.

The factory which was under control of the security forces has been looted and valuable steel taken away.

Liyanage expressed the view that the Kankesanturai operation should be revived with high quality limestone deposits, raw material for cement manufacture, belonging to the company exploited to make it a factor in the cement world.

He expressed the hope of putting the company on a firm footing in coming years.

The year ended Dec. 31, 2016, has seen the company which is carrying retained losses of Rs. 2.37 billion in its books, posting a loss of Rs. 5.68 million, down from the previous year’s loss of Rs. 8.05 million and a loss of Rs. 15.53 million a year earlier.

The 2013 loss was Rs. 192.9 million while a loss Rs. 385.2 million was posted in 2012.

The public shareholding of the company which has paid no dividends for several years amounts to 42.9 million shares (24.73%) with the ordinary share capital at Rs. 1.74 billion. Assets were stated in the latest published accounts as Rs. 275.3 million. Debt stood at Rs. 833.2 million and current liabilities at Rs. 76.2 million.

The auditors, Ernst and Young, have said that they have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Although property, plant and equipment valued at Rs. 230 million is described as located in the company’s factory, the factory had been completely destroyed in the war. The recoverable value has not yet been determined by the company.

The directors of the company are Messrs. Lalinda Liyanage (chairman), Reyyaz Salley (MD), Janaka Karunaratne, Abdul Rafeek, Malith Perera, AN Hapugala and NM Munawwar.

www.island.lk

First Capital Holdings bounces back in 2016/17

First Capital Holdings PLC (FCH), a member of the Janashakthi Group, has performed strongly in the year ended March 31, 2017, posting what its new chairman, Mr. Nishan Fernando, called a phenomenal increase in net profit which grew to Rs. 232 million from the previous year’s Rs. 47 million.

He said the improved performance was mainly attributable to the substantial improved performance by First Capital Treasuries PLC, the primary dealer arm of the group.

FCH is a full service investment bank specializing in capital market advisory services, wealth management, fixed income and equities which serve "an array of companies, institutions, government agencies, high net worth individuals and retail clients seeking truly objective advice, innovative solutions and execution expertise," the company said in its recently released annual report.

The year under review saw income growing 131.34% to Rs. 3.59 billion with net trading income up 13.46% to Rs. 572.2 million while the operating profit grew 368.05% to Rs. 245.5 million. Earnings per share were up to Rs. 2.09 from Rs. 0.46 the previous year and the company paid a dividend of two rupees per share. There was no dividend the previous year.

FCH suffered a sharp downturn in the previous financial year with the after tax profit slumping to Rs. 47.5 million from Rs. 984.9 million a year earlier.

Dunamis Capital PLC, a Janashakthi company, is the dominant shareholder holding over 78% of the company which has been quoted on the Colombo Stock Exchange since 1994.

"With out financials on track, our main thrust for the year was to increase market leverage and position the FCH Group for long-term growth," Fernando said. "Key initiatives in this regard saw renewed efforts to improve our external positioning and strengthen core brand architecture."

He also said that they had strengthened their senior leadership team bringing in experts in corporate finance and strategy.

Looking at future outlook, he said that at present the market appears stable but "in our business nothing is certain." However, thanks to strong fundamentals, he was confident that the FCH group is well equipped to navigate the challenging industry and market environment to reach their growth targets in the years ahead.

CEO Dilshan Wirasekera said the year ended on a high note as a result of proactive action to seize market opportunities. "However, as most often the case in our business, the operating environment did not culminate as we expected."

Mrs. Manjula Mathews, chairperson of the company till April 30, has retired. Her successor described her as an exemplary leader whose dynamic approach and often bold decisions has brought the company to where it is today.

The directors of the company are: Messrs. Nishan Fernando (chairman), Dinesh Schaffter, Dilshan Wirasekera, Eardley Perea, Ms. Minette Perera and Chandrana de Silva.

www.island.lk

Dilmah to consolidate with MJF Teas by the issue of new shares to parent

Dilmah Ceylon Tea Company PLC (previously Ceylon Tea Services PLC) has announced a private placement of its shares with its parent, MJF Teas (Private) Ltd. (MJFT) under which the businesses of the two companies, both engaged in manufacturing and exporting value-added tea bags, will be consolidated.

Under the restructuring for which approval of Dilmah Ceylon shareholders will be sought after that company’s annual general meeting scheduled for Sept. 25, Dilmah will take over the tea export business and related assets of MJFT at a cost of Rs. 442.5 million to be satisfied by the issue of 735,500 ordinary shares of the company to MJFT.

A Dilmah share has been valued at Rs. 600 each for the purpose of this transaction – slightly higher than the current market price of the share on the Colombo Stock Exchange. The 600-rupee price has been determined on the basis of the average traded price of the share from Feb. to July 2017.

MJFT is the controlling shareholder of Dilmah with a stake of 65.38% of the company. This will rise to 66.61% after the private placement of the new shares.

Currently MJFT supplies Russia and other former Soviet States, India and the US while Dilmah supplies the rest of the world.

In a recent circular to shareholders of Dilmah, the company said that "the consolidation of the tea manufacturing and exporting businesses (under Dilmah) will bring numerous benefits to the company" with its revenue and global market share rising significantly as a direct result.

The directors said that the expansion of the customer base across the globe had a potential for increased profits and earnings per share. It was also an opportunity to streamline internal processes of Dilmah which will benefit from economies of scale that will impact positively on the company’s cost base and overall operational efficiency.

Dilmah, which is a closely-held company controlled by Mr. Merril. J. Fernando and his two sons through related parties, will also move from the main board to the Diri Savi Board of the CSE due to the public float liquidity requirements now being enforced.

The new shares will not be entitled to Dilmah’s next dividend due to be formally approved by its shareholders at the forthcoming AGM. But they will qualify for future dividends.

The company is among the higher dividend payers among those quoted on the CSE and shareholders who invested in the company at its initial public offering many years ago has done very well on the share.

www.island.lk

Sri Lankan shrs end near 3-wk closing high; turnover highest in over 6 yrs

Reuters: Sri Lankan shares rose for a second straight session on Friday and ended at a near three-week closing high, while a block deal in Singer Sri Lanka Plc pushed turnover to over a six-year high.

The Colombo stock index ended 0.32 percent firmer at 6,402.03, its highest close since Aug.28.

The bourse rose 0.4 percent during the week, ending an eight-week long losing streak.

On Wednesday after market hours, diversified conglomerate Hayleys Plc said it had agreed to purchase 61.73 percent of Singer Sri Lanka Plc for 10.9 billion rupees from Retail Holdings (Sri Lanka) BV a subsidiary of Retail Holdings NV.

Hayleys in a corporate disclosure said on Friday that Hayleys Plc and its subsidiaries purchased 231.9 million shares or 61.73 percent of Singer Sri Lanka Plc at a price of 47 rupees per share.

Singer Sri Lanka saw foreign investor selling of 231.9 million shares and ended 0.4 percent lower. It accounted for 95.2 percent of the day’s turnover of 11.4 billion rupees, the highest since March 16, 2011 and well above this year’s daily average of around 921 million rupees.

Foreign investors net sold 10.8 billion rupees worth of shares on Friday, but they have been net buyers of 16.9 billion rupees worth of equities so far this year.

“We could see buying interest coming into the market after the Hayleys deal,” said Dimantha Mathew, head of research, First Capital Holdings.

“It reactivated local investor confidence and the market is getting stronger day by day.”

Shares of Commercial Bank of Ceylon Plc rose 1.6 percent while conglomerate John Keells Holdings Plc gained 0.7 percent and Lanka ORIX Leasing Company Plc closed 1.6 percent higher.

Hayleys Plc ended 0.04 percent lower. 

($1 = 152.9500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)

Capital of Sri Lanka's Bank of Ceylon raised

ECONOMYNEXT - The paid up capital of Sri Lanka's state-run Bank of Ceylon has been raised from 10 billion rupees to 15 billion rupees, by an order of Finance Minister Mangala Samaraweera.

As of the June the 5 billion rupees was set aside for a capital increase pending formal allotment.

Bank of Ceylon is Sri Lanka's largest commercial bank with gross assets of 1.8 trillion rupees.

It had 102 billion rupees of equity in the form of 15 billion paid up capital, 7.9 billion rupees of permanent reserve fund, 63 billion rupees of retained earnings and 15.9 billion rupees of other reserves.

Sri Lanka Treasuries yields fall

ECONOMYNEXT - Sri Lanka's Treasuries yields fell across maturities at Wednesday's auction with the 12-month yield falling 38 basis points to 9.20 percent, data from the state debt office showed.

The debt office sold 12.4 billion rupees of 6 month bills at 9.05 percent, down 18 basis points.

There were no sales of 3 month bills.

The debt office offered 23 billion rupees of bills and sold 22.4 billion rupees of bills

An estimated 26.3 billion rupees of bills were maturing this week.

Sri Lankan shares hit over 1-week closing high; tax bill weighs

Reuters: Sri Lankan shares ended at more than a one-week closing high on Thursday, helped by gains in beverage and diversified shares, even as investors adopted a wait-and-watch approach to assess the impact of a new tax bill, brokers said.

The Colombo stock index ended 0.14 percent firmer at 6,381.46, its highest close since Sept.4. It fell 0.2 percent last week, its eighth straight weekly drop.

“Market is slow and steady as most of the investors are on a wait-and-see approach as they want more clarity on the tax bill and direction from the budget,” said Reshan Kurukulasuriya, chief operating officer of Richard Pieris Securities (Pvt) Ltd.

The country’s finance minister is scheduled to present the government’s 2018 national budget on Nov 9.

The parliament passed tax reforms on Sept. 7 that should simplify the tax system, widen the tax base and increase government revenue, as agreed with the International Monetary Fund in exchange for a $1.5 billion, three-year loan.

Foreign investors net bought 69.8 million rupees worth of shares on Thursday, extending their year-to-date net inflow to 27.7 billion rupees worth of equities.

Turnover stood at 346.5 million rupees, well below this year’s daily average of around 859.1 million rupees.

Shares of Ceylon Tobacco Company Plc rose 4.2 percent, while Dialog Axiata Plc ended 1.8 percent higher and conglomerate John Keells Holdings Plc rose 0.5 percent.

On Wednesday after market hours, diversified conglomerate Hayleys Plc said it had agreed to purchase 61.73 percent of Singer Sri Lanka Plc for 10.9 billion rupees.

On Tuesday, top mobile phone operator Dialog Axiata Plc said that it acquired 80.34 percent of Colombo Trust Finance Plc for 1.072 billion rupees ($7 million). 

($1 = 152.9500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)

Hayleys to buy Singer Sri Lanka in Rs12.5bn deal

ECONOMYNEXT - Sri Lanka's Hayleys Plc said it is buying a 71 percent stake in Singer Sri Lanka Plc, a consumer durables manufacture and retailer for 12.56 billion rupees.

Hayleys and its nominees will pay 10.89 billion rupees will buy a 61.7 percent stake for 47 rupees per share immediately and another 9.47 percent stake over the next 12 to 15 months for the same price.

Hayleys in controlled by entrepreneur Dhammika Perera.

In speculative trading Singer rose to 52 rupees yesterday, higher than the disclosed price for Singer.

Hayleys has been on an acquisition spree in recent years which has pushed up leverage. 

Sri Lankan shares close little changed; tax bill weighs on market

Reuters: Sri Lankan shares closed little changed on Wednesday as local investors wait to see the real impact of the new tax bill, brokers said.

The Colombo stock index ended 0.07 percent weaker at 6,372.70. It fell 0.2 percent last week, its eighth straight weekly drop.

“Market is holding on with some crossings (block deals) in blue chips,” said Atchuthan Srirangan, a senior research analyst with First Capital Holdings PLC.

“Local investors are staying away as they are waiting to see the clarity on the new tax bill, while foreign investors are selling.”

The parliament passed tax reforms on Thursday that should simplify the tax system, widen the tax base and increase government revenue, as agreed with the International Monetary Fund in exchange for a $1.5 billion, three-year loan.

Foreign investors, who have been net buyers of 27.6 billion rupees ($180.45 million) worth equities so far this year, net sold 35.8 million rupees worth of shares on Wednesday.

Turnover was 627.3 million rupees, less than this year’s daily average of around 862.1 million rupees.

Shares of diversified conglomerate Hemas Holdings Plc fell 1.6 percent, Lanka ORIX Leasing Co Plc ended 1.4 percent weaker, Commercial Bank of Ceylon Plc dropped 0.7 percent and Dialog Axiata Plc ended down 1.7 percent.

After market hours diversified conglomerate Hayleys Plc said it had agreed to purchase 61.73 percent of Singer Sri Lanka Plc for 10.9 billion rupees.

The stock exchange had halted trading in Hayleys and Singer shares pending the announcement. 

($1 = 152.9500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

Singer Finance Lanka to raise capital adequacy with rights issue

LBO – Sri Lanka’s Singer Finance is to raise 551 million rupees by way of a rights issue, the company said in a stock exchange filing.

Subject to exchange and shareholder approval, the company is to issue 36,740,741 ordinary voting shares at 15 rupees each in the ratio of two new shares for every nine shares held.

The proceeds will be utilized to further expand the equity base of the company and improve capital adequacy. Proceeds will also be utilized to part finance the growth in the loan portfolio of the company.

The company has obtained Central Bank approval for the rights issue. The current stated capital of the company is 1,445,333,342 rupees represented by 165,333,334 ordinary voting shares.

Sri Lanka's primary dealers to be taxed at 28-pct

ECONOMYNEXT - Sri Lanka's primary dealers in government securities will be taxed at 28 percent under a new income tax law that will go into effect in April 2018, an official said.

Primary dealers in government securities borrow short term money and invest in longer term bonds at higher rates earning and interest differential and capital gains or losses.

Under a new Inland Revenue law capital gains are taxed at 10 percent and interest income at 28 percent for companies.

Thanuja Perera consultant to Sri Lanka's finance ministry said capital gains for primary dealers are standard business income.

As a result primary dealers will be taxed at 28 percent from next year.

Under current law, primary dealers have not been paying tax on an interpretation of the existing tax law. Primary dealers pay withholding tax on bonds they buy upfront.

Sri Lanka’s Serendib Hotels buys into boutique villa chain

ECONOMYNEXT – Sri Lanka’s Serendib Hotels, part of Hemas Holdings group, said it has bought a majority stake in a company owning and operating a chain of boutique villas in southern Mirissa for Rs309 million.

A stock exchange filing said Serendib Hotels had entered into a share sale and purchase agreement and shaeholders’ agreement with First Edge Investments Ltd. to buy 445,668 shares or 51.15% of Frontier Capital Lanka (Pvt) Ltd.

Frontier Capital and its subsidiary companies own and operate a collection of boutique villas under the name of ‘Lantern Beach Collection’ in Mirrisa, known for its beaches.

Subsequent to the investment, the villas will be managed by Serendib Hotels’ fully-owned subsidiary Managed by Serendib Leisure Management Ltd. under a hotel management agreement to be entered into between the parties.

Sri Lanka’s Dialog Telecom enters financial sector buying non-bank lender

ECONOMYNEXT – Sri Lankan celco Dialog Axiata has bought a controlling stake in Colombo Trust Finance PLC, a finance company owned by the Cargills group, for just over a billion rupees, in a foray into financial services.

A controlling 80% stake of 37.5 million shares in Colombo Trust Finance PLC, formerly Capital Alliance Finance PLC (CALF), was sold on the Colombo stock exchange Tuesday at Rs28.7 per share, at a 74% premium to its last traded price.

Dialog said in a statement it bought 37,374,598 shares or 80.34% of Colombo Trust Finance PLC, from Cargills Bank Limited.

Colombo Trust Finance PLC closed at Rs18.70, up Rs2.20 or 13.33%.

Dialog Axiata said its acquisition of Colombo Trust Finance will help expand its business into mainstream digital financial services.

“Dialog aims to bring together the realms of advanced digital connectivity and cutting edge financial technology (FinTech) to delivery a revolutionary suite of products and services.”

Dialog said it will focus on financing solutions aimed at increasing the affordability and accelerating the adoption of digital devices and services by a wide spectrum of consumers and businesses.

Dialog entered financial services in 2012 with its eZ Cash mobile payments service which now has over 2.8 million mobile payment subscribers across Etisalat, Hutch and Dialog mobile networks.

“Dialog envisages that its foray into financial services would help accelerate Sri Lanka’s drive towards adoption of digital financial services by encouraging digital savings and increase access to financial services to all segments of society,” said Dialog group chief executive Supun Weerasinghe.

“Dialog would also leverage this acquisition to drive down the entry barriers for adoption of smart technology and devices through inclusive financing solutions.”

NDB Investment Bank acted as financial advisors to the acquisition while FJ&G de Saram were legal advisors to the transaction.

Singer (Sri Lanka) stock soars on take-over speculation

ECONOMYNEXT - Singer (Sri Lanka) Plc, a consumer durables retailer soared 18 percent to 52.50 rupees on take-over speculation Tuesday, brokers said.

The stock opened at 44.20 rupees and closed at 52.50 rupees, up 8.10 rupees.

Singer Sri Lanka is part of Singer Asia, which is up for sale.

A local conglomerate which already has consumer durables franchise is tipped to be front runner in the take-over race.

Sri Lanka's consumer durables sales have slowed after a currency collapse destroyed purchasing power of the people. A drought has also hit incomes in agricultural areas badly.

But Singer has a strong brand name and it has moved in to communications and information technology.

Sri Lankan shares end marginally higher; block deals boost turnover

Reuters: Sri Lankan shares ended with modest gains on Tuesday as local investors picked up beverage and trading shares, while block deals boosted the turnover to more than a two-month high.

The Colombo stock index ended 0.08 percent firmer at 6,377.38.

The Colombo stock index fell 0.2 percent last week, its eighth straight weekly drop.


Top mobile phone operator Dialog Axiata after market hours said that it acquired 80.34 percent of Colombo Trust Finance for 1.072 billion rupees ($7 million).

Turnover was 2.03 billion rupees ($13.29 million), the highest since June 23 and well above this year’s daily average of around 863.5 million rupees.

“It was a good day and even as the market ended nearly flat, there were a lot of crossings,” said Dimantha Mathew, head of research, First Capital Holdings.

“The good sign is the buying interest from the local side that was lacking for a while was seen today even though the foreigners were net sellers.”

Shares in Dialog Axiata Plc rose 0.9 percent and conglomerate John Keells Holdings Plc ended 0.06 percent firmer.

Shares of Singer Sri Lanka Plc rose 18.2 percent while Ceylon Cold Stores Plc ended 3.2 percent firmer and Ceylon Tobacco Co Plc gained 1 percent.

Foreign investors net sold 155.6 million rupees worth of shares on Tuesday. But they have been net buyers of 27.7 billion rupees worth equities so far this year. 

($1 = 152.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Vyas Mohan)

Sri Lanka insurance firms face higher tax bill under new law

ECONOMYNEXT – Sri Lankan insurance companies are likely to face higher tax expenses under a new tax law that was passed by parliament last week, experts said.

Insurance firms which till now paid tax on investment income minus expenditure, will in future be taxed their profits, said Shamila Jayasekera, Partner-Tax at KPMG.

“You are also liable to pay tax on the surplus transferred to shareholders and to policy holders,” she told a forum on the new Inland Revenue Act organized by the Ceylon Chamber of Commerce.

But policyholders will be taxed at the concessionary rate of 14% for the first three years.

“It is possible some insurance companies did not pay tax now because they only pay tax on investment income minus expenses. So for most it was a loss,” Jayasekera said.

In future, most insurance firms will definitely have to pay tax although they will also be entitled to claim any loss.

There are also changes in the basis of deducting losses under the new Act.

Under the old law, losses from life insurance businesses, as well as leasing, could be set off only against the profit and income from such businesses

The new tax law allows full deduction of business losses and then there is no income tax liability but with the limitation that any balance can be carried forward only to six years unlike indefinitely previously, said Sulaiman Nisthar, Partner at Ernst & Young.

Sri Lanka’s new revenue law augments govt revenue: Moody’s

LBO - Sri Lanka’s newly revised Inland Revenue Act will augment the country’s very low level of government revenues, Moody’s said.

Vice President, Sovereign Risk Group of Moody’s Investors Service, William Foster, commenting on the new law said it replaces the existing law with a more efficient, modern and broad-based tax framework.

“Through past additions of multiple tax exemptions, Sri Lanka’s income tax efficiency and tax collection are weak relative to other sovereigns,” Foster said.

“The general government revenue-to-GDP ratio was only 14.3% in 2016, one of the lowest among B-rated sovereigns.”

The reforms of the Inland Revenue Act offer prospects of higher revenues.

Foster highlighted that the implementation of revenue reforms that foster long-term fiscal consolidation will be critical to shoring up Sri Lanka’s credit profile, which is weighed down by the country’s large debt burden and relatively weak debt affordability.

On September 7, Island’s new revenue law passed in Parliament with amendments with the bill receiving 90 votes in favour while 25 votes against.

Sri Lanka to tax unit trust income at the hands of beneficiaries

ECONOMYNEXT - Sri Lanka will tax earnings from unit trust or mutual funds at the hands of beneficiaries, under a new income tax law that will come into effect next year, an official said.

Income from unit trusts will be taxed at the rate of corporate income tax in the case of companies or individuals in the case of persons, Thanuja Perera, Tax Policy Advisor at Ministry of Finance told a forum organized by the Ceylon Chamber of Commerce.

Perera said Unit Trusts themselves will not be taxed. Such unit trusts should have 'eligibe investments' such as financial instruments.

But taxes and withholding taxes on investments made by unit trusts will be charged. In the case of bank deposits for example withholding taxes would be charged, capital gains on shares will not be taxed.

However corporates will have to pay the balance tax on their income.

Unit Trust that where beneficiaries are not entitled to income will be taxed at 24 percent. Other unit trusts will be treated as companies and taxed at 28 percent.

Sri Lanka to tax foreign currency deposit interest

ECONOMYNEXT - Sri Lanka will tax foreign currency deposits in the future in the same manner as rupee deposits through a new income tax law that will come into effect next year, a tax expert said.

Non-resident foreign currency accounts are were exempted from tax as an incentive not to keep dollars earned abroad in foreign banks.

Sulaiman Nishtar, Partner at Ernst and Young said under the new law, a withholding tax of 5 percent will be deducted by banks as a final tax, up from 2.5 percent.

Companies will be liable at 5 percent, but it will not be final tax and will form part of the taxable income.

Clubs and associations will be charged 5 percent withholding tax on interest but, it will not be a final tax and they will have to pay tax on income at 28 percent.

Sri Lanka leasing companies to be taxed on par with banks: tax expert

ECONOMYNEXT - Sri Lanka's leasing companies will no longer be able to claim capital allowances on the leased assets for tax purposes, under a new income tax law that will come into effect next year, a tax expert said.

Shamila Jayasekera, Partner, Tax, at KPMG, an accounting firm said the tax treatment of leases will be the same as bank loans in the future.

Leasing companies were earlier able to claim capital allowances on assets such as vehicles leased to a customer, which becomes an expense of the leasing company, reducing their tax liability.

Leasing companies own the assets, until they are transferred to the customer at a nominal price at the end of the term.