Apr 202014

SHARJAH: One of the tougher things for players of the Indian Premier League (IPL) to do is to justify their price tags at all times.

If a certain player has been bought by a franchise for a whopping sum, there’s always this fear of underperformance riding at the back of his mind. It’s not the player’s fault for he wasn’t the one asking the franchise to pay that kind of money for him. But the pressure factor never leaves him.

One of the inheritors of such an experience this season is Dinesh Karthik. Bought by the Delhi Daredevils this year for Rs 12.5 crore, the wicketkeeper-batsman, who played for Mumbai Indians in the last two seasons, has inevitably come under focus. To Karthik or to the Daredevils, the price-tag may not hold much importance but it is how he has been talked about so far this season – 2014’s million-dollar-man.

“I don’t look at it that way. For me it’s about winning as many games as possible for my team and getting Delhi into the top four. That’s the first aim for us, and I’ll try and work towards that,” he says.

After a duck in the first match, the match-winning half-century against Royal Challengers Bangalore on Saturday came as a huge respite. On Monday, he’ll be up against the formidable Chennai Super Kings, once again leading the side in place of Kevin Pietersen. “He’s (KP) getting better. I can tell you that much for sure. We are monitoring him real closely and definitely the first chance we have we will make him play,” he said.

Karthik, who had played with the franchise earlier too before shifting base to Mumbai, is now back but within a completely new set-up. He’s thankful that coach Gary Kirsten is around to guide this newly-formed unit this year.

“At this stage, I’d say we are very balanced and I have to give a lot of credit to the coach, Gary Kirsten. He’s somebody who doesn’t get too emotional and swayed by things and results,” says Karthik, explaining the expectations surrounding each game.

“He (Gary) believes in processes, which is one of the key elements in the IPL – to keep believing in processes and keep doing all the back work and keep it doing without any stress forthe players.”

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Dec 162013
CSE to implement minimum free float from January
The capital market watchdog Securities and Exchange Commission (SEC) is likely to issue a directive in early part of next year, setting out rules on the ‘minimum mandatory continuous free floating limits’ for Colombo Stock Exchange (CSE) listed companies, according to a top official.

SEC’s Officer in Charge (OIC) and Director Investigations Dhammika Perera said the directive would come as a blanket rule which must be applied by all listed entities— big or small, domestic or multinational.

The new rules will require a Main board listed company to maintain a minimum of 20 percent stake in the hands of the public while the requirement for a Diri Savi board listed company is 10 percent.

“Having said that, we do not expect all these companies to have their 20 percent or 10 percent stake in the hands of the public on the following day of the directive. We will give them some time to increase their existing public stakes to the stipulated levels over time. But eventually all will have to up their public free float to these levels,” he insisted.

The draft rules in the public consultation paper issued by SEC in September 2013 said they would allow two years from the effective date of the rules for all the listed entities to increase their public shareholding to the stipulated levels, but the increase must happen at least by 5 percent per annum.

Furthermore, SEC will have the discretion to reject or grant extensions for companies that fail to maintain the minimum public float. In the event of no further extension time is granted, those companies will be penalized by transferring them to the Default board.

However, the yet to be issued directive will have some leniency on Main board listed companies while some exemptions might be granted for them if the circumstances warrant.

“We might consider some of the requests on a case-by-case basis and they might be allowed some kind of leniency on the rule if the circumstances warrant. But no exemptions will be granted for Diri Savi board listed companies,” he added.

Mirror Business learns that exemption might be granted for entities whose market capitalization of the public float is maintained at minimum Rs.5 billion. But this will also depend on the number of shares and the percentage stake held by the public is in agreeable terms to the SEC.

The absence of a sizable free float is often cited as a deterrent to a more transparent and a liquid stock market. Hence the Colombo bourse is becoming less attractive for foreigners and foreign funds who seek easy exit whenever they want.

However the lack of liquidity in the Colombo bourse was also proved helpful to avert sudden massive capital outflows during the heightened Fed tapering fears this year. On the contrary, emerging markets like Indonesia, India and Brazil which have liquid capital markets saw massive outflows during the same period.

Setting up of minimum continuous free float limits has been on SEC’s agenda for the last three years and it never took off having twice called for the public comments back in September 2010 and July 2011.

“This time we received many representations for our consultation paper and we took all the measures to incorporate their concerns as much as possible in drafting the directive,” Perera said. (DK)

Oct 252013
Sri Lanka's resilience masks medium-term credit risks: Fitch
Sri Lanka is the only twin-deficit country in Asia having a growth unaffected by currency volatility, according to Fitch Ratings (Fitch).

Fitch cites this relative currency stability to a less open onshore capital account that provides insulation from volatile global capital flows, as well as the country’s increasing ability to tap offshore global bond inflows.

The Sri Lankan Rupee appreciated to a three months high of 130.55/60 to the dollar having appreciated 3.42 percent since August 28 when it hit a record low of Rs. 135.20. Meanwhile the Central Bank (CB) Governor Ajith Nivard Cabraal has said the Rupee is currently under appreciation pressure.

However Fitch cautioned of the strategy repercussions as it is adding to the stock of gross and net external liabilities and carries medium-term credit risks.

While appreciating the efforts by the authorities to tame the inflation to around 6.0 to 7.0 percent from a near double digit level in late 2012, Fitch said it does not project the growth to be in excess of 6.0 percent this year, rising only to 6.6 percent in 2014.

This is despite the CB’s somewhat ambitious growth target of 7.5 percent and 8.0 percent for 2013 and 2014 respectively.

Fitch however said this benign growthinflation story is not enough to improve country’s overall sovereign credit profile which is currently at BB-, (with a Stable outlook) three notches below the investment grade due to two reasons.

The first reason is the low progress made in narrowing the current account deficit in the Balance of Payments and the second being country’s failure in attracting much Foreign Direct Investments (FDIs) even after the end of the conflict.

Fitch expects Sri Lanka’s current account deficit to remain at 5.6 percent, a 1 percentage point improvement from a year ago. However the government targets to reduce the deficit to 4.7 percent of GDP this year.

Sri Lanka’s current account deficit is larger than all the other Fitch-rated Asian emerging markets, except Mongolia (B+) and is also larger than the ‘BB’ median current account deficit of 2.7 percent of GDP.

“Moreover, we see a rising external debt service burden limiting further improvement in the current account position in the year ahead,” Fitch opined.

The net FDIs to Sri Lanka since 2009 has averaged only 1.2 percent of GDP which is low in comparison to most of the regional peers, and thus has fueled the reliance on debtcreating capital. (DK)

Oct 232013
Sri Lanka targets US $ 2bn FDIs from CHOGM
Sri Lanka’s investment promotion bureau, the Board of Investment (BoI), said it would expect at least US $ 2.0 billion worth of foreign direct investments (FDIs) in 2014 from the Commonwealth Heads of Gover nment Meeting (CHOGM) alone.

BoI Director Promotion Dilip S. Samarasinghe said they were expecting at least 1,000 delegates from 60 countries to the Commonwealth Business Forum (CBF), the biggest business forum ever held in Sri Lanka along with the CHOGM.

The CBF will be held from November 12 to 14 and would be an ideal opportunity to attract the most important FDIs to the investment-hungry nation.

“We have so far received 337 confirmed foreign participants from both Commonwealth and non-Commonwealth countries out of a total 500 openings. There will be another 500 local businessmen,” he said at a media briefing held to announce the economic benefits of the CHOGM.

To this effect, the BoI has identified 56 projects, of which, projects relating to investment substitution rank the highest in the priority list, according to Investment Promotion Ministry Secretary M.M.C. Ferdinando.

“Especially we look at promoting import substitution sector-related projects. For instance, we would like to encourage the foreign investors to start manufacturing here not only to cater to the domestic demand but also to the export market,” he said.

This is besides the investment opportunities in agriculture, manufacturing, tourism education, IT/BPO, renewable energy and infrastructure.

Ferdinando further demonstrated the significance of upping the FDI flows to at least to 4 percent of the gross domestic product (GDP) (or US $ 3.0 billion) from the existing 2 percent, in order to fill the vast investment vacuum in the country, as the country does not generate adequate savings to support an 8.0 percent growth.

Investment Promotion Minister Lakshman Yapa Abeywardena said Sri Lanka managed to attract a paltry US $ 2.36 billion during the period 1978-2005 but it leaped to as much as US $ 6.8 billion during 2006-2012.

CA Sri Lanka President Sujeewa Rajapakse illustrated how Australia leveraged the CHOGM in 2011 to attract as much as US $ 10 billion worth of FDIs in the aftermath. He further justified the massive government spending on city beautification in a bid to give a fresh facelift to Colombo, which is currently being carried out hurriedly, as these are well needed capital expenditure that will have long-term benefits.

Further, the BoI will set up a miniBoI Centre at Cinnamon Grand Hotel to provide investment facilitation to these visiting foreign investors during the three days. The centre will have staff conversant with multiple languages to assist investors from different nationalities.

The centre will also facilitate one-toone business meetings between project holders and the potential investors. Site visits to key projects will also be arranged on request by the investors.

Deputy Investment Promotion Minister Faizer Mustafa told the CHOGM was an ideal opportunity for Sri Lanka to change the perception, showcase what she has to offer to the investors and also to counter the unsubstantiated allegation levelled against the country by various parties with vested interests. (DK)

Oct 142013
Touchwood to pay all matured contracts in 8 months
Touchwood Investments PLC yesterday undertook in courts to repay all matured contracts within a period not exceeding eight months in three instalments, according to the lawyers appeared for the company.

When the case to appoint a provisional liquidator was taken up yesterday for the second hearing at the Commercial High Court Colombo, the company had undertaken to file the repayment plan as earlier instructed by the judge. The lawyers appeared for the company had further filed objection to appointing a provisional liquidator.

“The company agreed to pay all the matured contracts which they had entered into in their repayment plan,” the counsel appeared for Touchwood said.

Despite the total amount due is still being finalized, the payments would be made on a staggered basis.

The initial 25 percent of the total amount due will be made in three months, while another 25 percent will be paid in total of five months, while the balance 50 percent will be made in eight months starting from October 14.

“The company further undertook to file a comprehensive breakdown of the contracts which are already matured and are due to be matured when the case was taken up again on October 31, 2013 for the third hearing,” said the counsel.

Meanwhile, Touchwood Chairman L.W. Kiwlegedara told Mirror Business that they had already started their restructuring process and to that effect, three new appointments including one board appointment had been made at the last board meeting.

“We appointed the former Deputy Chairman Asitha Koralage as our Restructuring Consultant and Tivanka Ekaratne as our Legal Advisor to the board,” he said.

Last week, Touchwood appointed Chamitha Ranneththi, a real estate investment and a property management consultant and the Chairman of RKC Construction and Consultancy Ltd as an Independent Non-Executive Director, following a slew of changes in the board.

“Chamitha’s appointment was made in order to add the right blend of skills into the board,” Kiwlegedara added. (DK)

Oct 142013
Separate board to list BoI firms
Both the Securities and Exchange Commission (SEC) and Colombo Stock Exchange (CSE) are currently working on a project to lure the Board of Investment (BoI) companies into the stock market in a bid to increase the number of listings and market liquidity, according to a top capital market official.

SEC Chairman Dr. Nalaka Godahewa told last week that a separate board would be introduced in addition to the existing Main Board and the Diri Savi Board to facilitate the process.

“We have agreed to allow the BoI companies to list on a separate board without having to wait three years to list on the Main Board,” he told a business forum organised by the CSE targeting potential new listings.

Currently, a company seeking a listing on the CSE, irrespective of being a BoI or otherwise, will have to follow the existing listing rules and thus, the BoI firms do not enjoy any special treatment.

Meanwhile, CSE Assistant General Manager for Regulatory Affairs Renuke Wijewardena speaking to Mirror Business said although this is a new development, they have not finalized any rules as yet.

“This is a new thing. But we have not yet finalized any rules so far,” he remarked.

However, to this end, a policy paper has already been prepared and both the SEC and CSE have extensively discussed them.

“These policy papers have been extensively discussed both at the CSE and SEC to address all possible concerns,” Dr. Godahewa added.

According to the BoI, there are about 1,700 BoI companies operating in Sri Lanka but did not have figures as to how many are already listed on the CSE.

“But I believe most, if not all leading Sri Lankan companies such as John Keells Holdings have some of their business units established under the BoI and most of these companies are listed,” said BoI Director Media and Publicity Dilip S. Samarasinghe.

Both the SEC and CSE are currently exploring all available options to lure more companies to go public in their quest to increase the number of listed entities to 400 by 2016 from the existing 288 and to improve the market capitalization to at least 50 percent of the gross domestic product (GDP) by the end of 2016. (DK)

Oct 042013
Overseas remittance inflows heavily used for consumption: Economist
Migrant worker remittances received by Sri Lanka are almost entirely spent on consumption and are not mobilized in to investment generating activities, raising concerns over its ability to provide economic value addition in the long run.

Research Economist at Sri Lanka’s economics policy think tank Institute of Policy Studies (IPS), Anushka Wijesingha recently said, though Sri Lanka’s huge remittance inflows immensely help to bridge the trade gap, the country does not have a policy to mobilize these inflows beyond consumption.

“Research studies on agricultural families who usually get huge amounts of remittance money, have shown that they don’t invest them even to purchase a tractor or share with other villagers to buy a combine harvester,” he told a top business executives forum.

In contrast, in Philippines which has somewhat similar economic attributes to that of Sri Lanka, remittances play a huge role in driving their economy.

Wijesingha however appreciated the role played by the remittances so far in driving economic growth even through consumption.

“If you look at the consumption part of growth, remittance money coming in to the country has been a major player because these remittances go straight in to the rural economy and change their aspirations,” he demonstrated. Country’s worker remittances topped US $ 6.0 billion in 2012 contributing as much as 60 percent to bridge the wide trade gap and also provide a cushioning for currency weakening.

Meanwhile the Senior Economist at Heyleys Group, Deshal De Mel said remittance flows are not sustainable forms of flows that the country could rely on to protect its external front.

“It is something that we cannot rely on going forward, having migrant remittances as a way of significant component of our external income. This is mainly because Sri Lanka doesn’t have significant natural resources and our labour being the most valuable resource,” he remarked. (DK)

Aug 222013
Troubled finance company deep in the red
The troubled finance company, Central Investment & Finance Company PLC (CIFL) continued to mount its losses and the first quarter (1Q14) results released to the Colombo Stock Exchange (CSE) showed a net loss of Rs.182 million. In the corresponding quarter last year, the company’s net profit stood at Rs.334, 000.

The company’s Loss per Share is 218 cents. The net loss recorded by the company during the financial year ended March 31,2013 was Rs. 330.4 million.

The net interest income of the company plunged by a staggering 261 percent Yearon-Year (YoY) to a negative Rs.127.4 million. This was because the company had to account as much as Rs.150 million in interest expenses for their deposit holders when it could only accrue an interest income of Rs.22.6 million during the three months to June 30, 2013. Interest income received from leases and hire purchases more than halved to Rs.3.2 million while the interest income from loans plunged to Rs.19.2 million from Rs.68.5 million a year ago.

Real estate and housing segments did not bring revenue during the period while other investments income were only Rs. 216,000, a steep drop from Rs. 3.0 million a year ago.

Operating expenses decreased by 30 percent YoY to Rs.57 million, demonstrating the management’s effort to reduce costs.

Since the termination of the services of ex-CEO, Jayanth Wickrameratne in January, there was a run on the deposits, and according to the then Chairman, Lakshman Rupasinghe (now a board member), deposit holders withdrew their deposits upon maturity without renewing it for a further period, eroding the deposit base.

As of June 30, the company has a deposit liability of Rs.3.3 billion, largely unchanged from March 31,2013.

Meanwhile the high expectations for a fresh equity infusion of US $ 12 million by the new owners, the Roscoe Maloney family to revive the ill-fated company also appear to be remote.

The Central Bank issued a directive on July 01, appointing Peoples’ Leasing and Finance PLC as the managing agents and allowed time till July 31 to come up with a revival plan for CIFL. Further, the Central Bank removed all executive powers from executive board members and instructed the managing agents not to mobilize fresh deposits until further notice. Unlike many other finance companies, CIFL lacks the presence of a single largest shareholder, to provide strength and stability when times are not so good. Currently the largest shareholding by a single party is 17.53 percent held by Aspic Corporation Private Limited. (DK)

Aug 212013
SEC seeks rule change to lure pension funds to debt market
While steps are being taken towards facilitating US dollar bonds issuances by Sri Lankan corporates, capital market regulator is currently exploring the possibilities in getting the restriction on large pension funds in investing in the country’s corporate debt market, relaxed.

According to the Securities and Exchange Commission (SEC), the rationale behind this initiative is to encourage longterm fund investments in to the corporate bond market.

“We are currently in discussions with the Treasury, Central Bank, Insurance Board etc. to relax these restrictions and allow more devolvement from these funds,” SEC Chairman Dr. Nalaka Godahewa.
Currently, the investment guidelines of long term pension funds such as insurance funds, Employees’ Provident Fund, Employee Trust Fund etc. do not permit large investments in corporate bonds.

Participating in a panel discussion on the ‘Diversification Opportunities for Financing for Sri Lankan issuers’, organized by Standard & Poor’s last week, Dr. Godahewa observed the absence of an active secondary market in Sri Lanka as an impediment for the corporate bond market to take off.

“One important thing to develop the corporate bond market is to have an active secondary market. To do that, one thing we are lacking in Sri Lanka is the market makers,” he observed. Mirror Business previously pointed out that corporate debt is highly concentrated among a very few large institutional investors such as banks and large corporates.

And it was also highlighted that predominantly due to the lack of liquidity, there is virtually zero secondary trading of these listed corporate debts.

However, SEC has proposed to bring down the minimum subscription of corporate bonds to Rs. 10,000 from the current high of Rs.1 million or so in order to bring active retail participation.(DK)

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