Sri Lanka’s First Capital A- rating confirmed by ICRA

ECONOMYNEXT – ICRA Lanka Limited has confirmed the issuer rating of SL[A-] with stable outlook for First Capital Holdings PLC (First Capital).

ICRA Lanka Limited, a subsidiary of ICRA Limited, a group company of Moody’s Investors Service, also confirmed the issuer rating [SL]A- with stable outlook for First Capital’s standalone primary dealer First Capital Treasuries PLC.

First Capital Treasuries accounts for 70% of the consolidated assets and 80% of the consolidated net trading income of First Capital for FY2017, a statement said.

The ratings take note of First Capital’s efforts to expand the business and financial performances of the other subsidiaries, which are engaged in corporate debt structuring, corporate finance, asset management, stock broking, extending margin trading facilities and trustee services.

However, the scale of operations of these subsidiaries continues to remain moderate.

“First Capital’s borrowings are largely short term in nature and are used for investment and lending to group entities,” the statement said.

The rating factors the First Capital group’s established relationships with banks and financial institutions, providing access to funding.

ICRA Lanka said it expects timely funding support from First Capital Treasuries, considering the liquid nature of its assets.

First Capital, being a holding company, derives its income from the dividends from the group entities and income from its investments, which includes interest income and profit from investments.

For the FY2017 stand-alone income from investment activities improved, to Rs774 million total income in FY2017 from Rs336 million in FY2016, while the share of profit from subsidiaries increased steeply to Rs194 million in FY2017 from Rs14 million in FY2016.

First Capital Holdings group firms include First Capital Limited involved in structuring and placement of corporate debt and corporate finance advisory services and investments, First Capital Asset Management Limited involved in unit trust and portfolio management, First Capital Markets Limited involved in providing margin trading facilities and dealing and broking of listed debts, First Capital Trustee Services (Pvt) Limited a trustee services provider for corporate debt securities and First Capital Equities (Pvt) Limited engaged in stock broking activities.

Sri Lanka’s CIC buys Unipower specialised fertiliser firm

ECONOMYNEXT – Sri Lanka’s CIC Holdings, an agribusiness group, said it had bought control of Unipower (Pvt) Limited, a firm packing and selling specialised fertilisers.

A stock exchange filing said CIC Holdings about a 70% stake of Unipower or 376,600 shares at Rs632.17 a share. The total investment amounts to Rs238 million.

Unipower would now be a subsidiary of CIC Holdings.

Sri Lanka to enforce tougher stock market rules from January 2018

ECONOMYNEXT – Sri Lanka’s markets regulator said it has decided to adopt a more stringent policy of enforcement of listing rules with tougher regulations to be enforced from 1 January 2018.

The Securities and Exchange Commission said it has asked the Colombo Stock Exchange to incorporate several rules drafted in relation to violations of rules on corporate governance of listed companies.

These include late submission or non-submission of interim financial statements and annual reports and the incidence of modified audit opinions and incidence of an emphasis of matter of going concern in audited financial statements.

Under the new rules, listed firm must give to the CSE for public release an ‘impact report’ containing a detailed description on the impact of the audit qualification to the financial statements.

At present CSE listing rules do not contain any rules on action to be taken by the CSE in the event the audit opinion in the annual report is found to be a “modified audit opinion” or contains an “emphasis of matter on going concern”.

The impact report shall at a minimum contain cumulative impact on profit or loss, net assets, total assets, turnover/total income, earnings per share and any other financial item(s) which may be impacted due to qualified audit opinion.

Listed companies will also be required make an announcement to the market via the CSE on the qualified audit opinion, stating remedial action adopted or proposed to resolve the matters set out in the qualified opinion.

Sri Lankan shares snap winning streak, end lower on profit-taking

Reuters: Sri Lankan shares snapped a winning streak to end lower on Monday, slipping from their highest close in more than 10 weeks hit in the previous session, with investors booking profits in financials, brokers said.

The Colombo stock index ended 0.55 percent weaker at 6,595.94, slipping from its highest close since July 31 hit on Friday. Last week, the bourse rose 1.6 percent, posting its fifth straight weekly gain.

“Today, we saw some profit-taking in the market,” said Atchuthan Srirangan, senior research analyst, First Capital Holdings PLC.

“But the good thing is that profit-taking happened in low volumes. Foreigners are calm and waiting to see a direction.”

Shares of Hatton National Bank ended 3.7 percent weaker, Commercial Bank of Ceylon Plc closed 2.7 percent down and Sampath Bank Plc finished 2.7 percent down.

John Keells Holdings Plc ended down 0.2 percent.

Turnover was 394.9 million rupees ($2.57 million), less than half of this year’s daily average of 937 million rupees.

Foreign investors were net buyers of shares worth 3.3 million rupees on Monday, extending the year-to-date net foreign inflow to 20.2 billion rupees worth of shares so far this year.

($1 = 153.5500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips)

Sri Lanka’s Dialog to curb loan portfolio, deposits of Colombo Trust Finance

ECONOMYNEXT – Sri Lankan celco Dialog Axiata said it will retain all employees of Colombo Trust Finance, a finance company it acquired, and increase its core capital but restructure its loan portfolio and deposits.

Dialog Axiata last month bought a controlling stake in Colombo Trust Finance PLC from the Cargills group for just over a billion rupees, in a foray into financial services.

According to the Mandatory Offer document by Dialog Axiata for Colombo Trust Finance (CTF), it sees the acquisition as expanding Dialog’s scope of operations into digital financial services (DFS).

“Dialog intends to continue operations of CTF as a standalone business providing financial services managed independently under the guidance of senior management appointed by Dialog,” it said.

Dialog said expects to use the existing fixed assets of CTF and where required make investments in technology to facilitate business operations under DFS.

However, Dialog said it does not intend to continue with the existing product portfolio offered by CTF and plans to “significantly curtail and restructure the existing loan portfolio and deposits.”

Dialog said it will retain all employees of CTF and increase core capital of CTF in terms of the finance business act direction No. 2 of 2017 which requires finance companies to raise core capital to Rs400 million by December 2017 and Rs1 billion by January 2018.

Fraud hit Sri Lanka gilt dealer Entrust reveals Rs11bn scam

ECONOMYNEXT - Sri Lanka's Entrust Securities, a primary dealer in government securities embroiled in a fraud has revealed an 11 billion rupee hole in its balance sheet by June 2017, which is growing at the rate of 200 million rupees a quarter with new losses.

Entrust Securities Plc in unaudited accounts filed with the Colombo Stock Exchange said it had assets of just 753 million rupees and liabilities of 12.34 billion rupees, leaving 11.58 rupees unaccounted for.

The firms March 2015 accounts audited by Price WaterHouse Coopers showed assets of 17.3 billion rupees.

As late at June 2016, Entrust reported assets of 16.4 billion rupees and profits of 95 million rupees, when reporting paused.

The June 2017 accounts shows losses of 223 million rupees and an 11.5 billion rupee hole in the balance sheet.

The March 2017 accounts filed at the Colombo Stock Exchange which was also just filed shows a loss of 197 million for the quarter and an 11.3 billion rupee loss recognized last year.

The firm had taken money from large investors and several state pension funds including a central bank backed against government bonds, but sold the bonds to third parties.

Entrust was put under the administration of National Savings Bank by the central bank in 2016 and top officials were later arrested by police.

A government minister told parliament that Entrust had funded the Carlton Rugby Tournament connected to ex-President Rajapaksa's son Namal with millions of rupees.

It owned the Western Warriors club, whose Captain was Yoshitha Rajapaksa, who was brought from an auction paying 11 million rupees, Minister Kabir Hashim told parliament.

He said the central bank had not taken any action during the Rajapaksa regime despite on-site investigations by examiners showing money was missing.

Sri Lankan shares rise for 4th session; beverage, diversified stocks up

Reuters: Sri Lankan shares rose for a fourth straight session on Friday and posted their highest close in more than 10 weeks, as investors bought beverage and diversified stocks, brokers said.

The Colombo stock index ended 0.16 percent firmer at 6,632.30, its highest close since July 31. It rose 1.6 percent this week in its fifth straight weekly gain.

“This week we have seen a big rally and today we saw some profit-taking, but the market ended firmer on the continued bullish trend,” said Atchuthan Srirangan, a senior research analyst with First Capital Holdings PLC.

Shares of Ceylon Cold Stores Plc ended 3.2 percent firmer, Lion Brewery (Ceylon) Plc rose 6.0 percent and John Keells Holdings Plc ended up 0.2 percent.

Turnover was 688.4 million rupees ($4.48 million), less than this year’s daily average of 937 million rupees.

Foreign investors were net sellers of shares worth 8.8 million rupees on Friday, after having bought 3.7 billion rupees of equities in the 16 sessions through Tuesday. They have net bought 20.2 billion rupees worth of shares so far this year. 

($1 = 153.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)