Sunshine Holdings PLC to raise Rs. 775 million through private placement

Sunshine Holdings PLC announced that its shareholders unanimously approved the proposed private placement, to raise Rs. 775 million, with SBI Ven Holdings (Pte) Limited, the overseas private equity firm of Japan’s financial giant SBI Holdings Inc.

The board proposed to issue 11.9 million ordinary Sunshine shares to SBI Ven Holdings at a price of Rs.65 per share, which was approved by the shareholders at the EGM held on June 28, 2018 in Colombo.

Through this private placement, Sunshine Holdings looks to reduce its net debt and net finance cost. Moreover, the capital raised through the private placement would be used to pay the interest and capital arising from bank borrowings.

The SBI Group is a key player in the Japanese securities industry and has keen interests in the financial services sector in Japan. With over 5,000 employees and assets under management in excess of US$ 3 billion, SBI Group has offices in over 15 countries and invests in about 800 companies globally.

Sunshine Holdings Group Managing Director, Vish Govindasamy said, “The unanimous approval by shareholders of our private placement with SBI Ven Holdings marks an important milestone for Sunshine.

We believe we have earned a significant premium over market price and this signals substantial unrealised value in the share.”

“Moreover, this transaction brings in vital foreign direct investments (FDI) at a time when it is much needed in the market and the economy. This represents further validation of Sunshine Holdings’ long term vision and strong corporate governance framework — ideally suited to the needs of foreign investors — which has won the confidence of a leading global equity firm like SBI Ven Holdings,” Govindasamy said.

Sunshine Group has worked with strong international partners before, especially in consumer and agribusiness sectors where the Group had a long and mutually beneficial partnership with TATA Global Beverages (TGBL) and Wilmar International.

TGBL exited the partnership in December 2017 as part of its global restructures, which allowed Sunshine Group to consolidate its stake in consumer and agribusiness sectors when the Group bought over 6.7 million shares of Estate Management Services Limited (EMS) from TGBL for Rs.1.6 billion.

In April last year, SBI Ven Holdings acquired a10.99% stake in Sunshine Holdings for Rs.742.5 million. The stake, which amounted to 14.85 million shares, was done at Rs.50 each. SBI Ven Holdings is the third largest shareholder of the diversified conglomerate.

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LB Finance records Rs 4.3 B PAT in FY18

LB Finance accomplished a stellar performance for the year ended March 31, 2018, the company said in a media release.

Operating Profit before Tax on Financial Services crossed the Rs. 7 bn milestone to reach Rs. 7.8 bn as at March 31, 2018, a growth of 13.2% over the previous year. Total operating income recorded a growth of 20.4% reaching Rs.13.5 bn. Net interest income, the main source of revenue, grew by a phenomenal 21.4% while profit after tax was up by a commendable 8.5% year on year reaching Rs. 4.3 bn in 2017/18 the highest ever recorded in the Company’s history.

Profit before tax grew by 10.3% reaching Rs. 6.4 bn for the financial year 2017/18, one of the highest recorded among all the players in the Non-Banking Financial Institutions (NBFI) Sector for the year. Total assets crowned the Rs. 120 bn mark, recording a growth of 17.6% from the previous year. Profitability in terms of Return on Assets and Return on Equity were recorded at satisfactory levels of 3.8% and 30.5% respectively for the year. Total Deposit base grew by 20.8% over the previous year reaching 73.0 bn for the financial year 2017/18. Net Asset value per share grew by 22.7% over the previous year to Rs. 110.80.

The company maintains its position as a leading financial institution in Sri Lanka, a status which it has leveraged on to expand and reach other markets in Asia, specifically Myanmar. In striving to enhance its credentials as a regional player, the company’s strategy is to focus on the opportunity for growth by taking into account, the matters which are material to the long-term sustainability and the ability to leverage the assets and the expertise of the wider Vallibel One group. In doing so, the intention is to be the first to respond effectively and efficiently to the needs of the company’s key stakeholders by aligning the corporate strategy, in cognisance with the prevailing economic environment and prospective opportunities.

Managing Director of LB Finance, Sumith Adhihetty said, “While changes in the economy are beyond our control, we want to be prepared to always be at the forefront of change management. This means having a broad and forward-looking perspective in order to foresee our customer’s needs and actively seeking opportunities to achieve a sustainable competitive advantage, enhance our corporate value, and continue to create wealth for all of our stakeholders: our shareholders, customers, our employees and their families as well as the local societies in which we operate.”

LB Finance recorded a strong, above industry average total capital adequacy ratio of 19.8% as at March 31, 2018 against the minimum regulatory requirement of 10% demonstrating its robust financial stability. Further, A- (lka) rating from Fitch Ratings Lanka Ltd. with a stable outlook denotes expectations of low default risk and strong capacity for payment of financial commitments. Moreover LB Finance maintained its NPL rate at 2.37% while the industry rate was 5.9%.
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Sri Lanka holds rates, amid external jitters

Sri Lanka holds rates, amid external jitters ECONOMYNEXT - Sri Lanka has held its main policy rate at 8.5 percent in June amid global jitters, which has triggered outflows from capital markets, the central bank said, with inflation ticking up slightly.

"Short term interest rates increased recently responding to the prevailing deficit liquidity conditions in the domestic money market," the central bank said.

"Yields of short term government securities displayed mixed movements in the recent past, while other market interest rates appear to have stabilised at elevated levels.

"While appropriate open market operations will address short term liquidity concerns, it is expected that nominal and real interest rates would gradually adjust downwards in line with the neutral policy stance of the Central Bank and the prevailing low inflation environment."

After loosening policy in April, the central bank has kept a fairly tight leash on money markets amid international jitters, with the dollar strenghtening. Liquidity shortages also develop when the central bank defends the currency.

"Tightening global financial conditions prompted some outflows from the rupee denominated government securities market and the secondary market of the Colombo Stock Exchange (CSE).." the central bank said.

Inflation in the 12-months to June rose to 4.4 percent from 4.2 percent, a month earlier,

Credit to private sector grew 15.3 percent in April and 15.1 percent in May.

In April private credit had grown 22 billion rupees and in May 29 billion rupees, though lower than the sudden 122 billion spike seen in March.

The full statement is reproduced below:

Monetary Policy Review: No. 4 – 2018

The Central Bank of Sri Lanka maintains policy interest rates at current levels

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 05 July 2018, decided to maintain policy interest rates at their current levels. Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) remain at 7.25 per cent and 8.50 per cent, respectively. The Board’s decision is consistent with stabilising inflation at mid-single digit levels in the medium term, thereby contributing to a favourable growth outlook for the Sri Lankan economy.

Inflation to stabilise at mid-single digit levels despite temporary supply side pressures

Headline inflation, as measured by the Colombo Consumer Price Index (CCPI) and the National Consumer Price Index (NCPI), remained at low single digit levels, in spite of the transient acceleration mainly arising from the upward revisions to prices of domestic petroleum products and other administratively determined prices.

Core inflation also remained subdued, and inflation expectations remain favourable. Although pressures on domestic food supplies during the off-season could exert some upward pressure on prices in the short term, inflation is expected to remain at the desired mid-single digit levels during the remainder of the year and over the medium term, underpinned by firmly anchored inflation expectations and appropriate policy adjustments. 2

Economic growth remained subdued in the first quarter of 2018

According to the provisional estimates released by the Department of Census and Statistics (DCS), the Sri Lankan economy grew by 3.2 per cent, year-on-year, in the first quarter of 2018, compared to the revised annual growth rate of 3.3 per cent in 2017. Economic growth during the first quarter of 2018 was mainly driven by the Services and Agriculture related activities while the Industry related activities recorded a moderate growth. It is envisaged that the government’s continued commitment to the implementation of structural reforms will help the economy to attain its potential over the medium term, amidst fiscal consolidation.

The sustained recovery in the global economy is likely to support domestic economic growth, while the prevalence of a low inflation environment and an appropriately valued flexible exchange rate are also expected to facilitate higher growth.

Interest rates remain high both in nominal and real terms, while growth in money supply decelerated

Short term interest rates increased recently responding to the prevailing deficit liquidity conditions in the domestic money market. Yields of short term government securities displayed mixed movements in the recent past, while other market interest rates appear to have stabilised at elevated levels. While appropriate open market operations will address short term liquidity concerns, it is expected that nominal and real interest rates would gradually adjust downwards in line with the neutral policy stance of the Central Bank and the prevailing low inflation environment.

Meanwhile, the year-on-year growth of broad money supply (M2b) decelerated in May 2018. The growth of credit extended to the private sector by commercial banks too decelerated in the months of April and May 2018, following the festive season-led credit expansion observed in March 2018.

External sector performance buoyed by strong foreign exchange reserve position

The moderation of earnings from exports alongside the increase in import expenditure resulted in an expansion of the trade deficit over the first four months of 2018. The recent growth in imports was largely driven by the importation of personal vehicles and gold, and the latter is expected to have been addressed by the imposition of the customs duty on gold imports. Earnings from tourism and workers’ remittances continued their positive growth momentum so far during the year.

Tightening global financial conditions prompted some outflows from the rupee denominated government securities market and the secondary market of the Colombo Stock Exchange (CSE), although primary market inflows resulted in a net overall inflow to the CSE so far during the year.

Amidst these developments, the Central Bank recorded a net foreign exchange absorption of US dollars 141 million from the domestic market in the first half of 2018. With the successful issuance of the International Sovereign Bond (ISB) in April 2018, the receipt of the fifth tranche of the Extended Fund Facility with the International Monetary Fund (IMF-EFF), receipts from the divestiture of the Hambantota port and foreign exchange purchases of the Central Bank from the domestic market in early 2018, the gross official reserve position is estimated to have improved to around US dollars 9.2 billion by end June 2018, compared to US dollars 8.0 billion at end 2017.

So far during the year, the Sri Lankan rupee has depreciated against the US dollar by 3.6 per cent. Much of this depreciation was recorded since late April, reflecting the broad based strengthening of the US dollar in the international market. The Central Bank intervened in the domestic foreign exchange market to address speculative behaviour in the foreign exchange market and the unwarranted volatility in the exchange rate.

Unchanged monetary policy stance to sustain inflation at mid-single digit levels

Based on the recent developments and outlook for key macroeconomic variables, the Monetary Board of the Central Bank was of the view that the continuation of the current monetary policy stance is appropriate. The Central Bank will remain vigilant on global market developments and possible spillover effects, while continuing to closely monitor domestic real economic activity. Accordingly, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels.