• Paints & General Industries and major shareholder Sohli Captain grant an irrevocable proxy to CIC over their voting rights in JKH
• A stock market filing says CIC now holds 25.3% of the voting rights in JKH through the contractual agreement
• The move could make CIC’s financial statements more attractive, with a portion of JKH’s profits being reflected on CIC’s accounts

CIC Holdings yesterday said it will begin treating premier blue chip John Keells Holdings PLC (JKH) as one of its associate companies, with the controlling shareholders of CIC agreeing to grant proxy over their voting rights in JKH to CIC for a period of 10 years.

A stock market disclosure by CIC said it entered into an agreement on October 2, 2023 in this regard with Paints & General Industries Limited (P&GI) and its major shareholder Sohli Captain and several companies held by him and Rusi Captain.
P&GI owns 53.31 percent of the issued shares of CIC Holdings.

“…they have granted CIC an irrevocable unconditional proxy over their voting rights from their shareholdings in JKH to CIC for a period of 10 years,” the filing said.

As per the filing, CIC and its subsidiaries own approximately 6.6 percent of the issued shares of JKH, which calculates to an effective shareholding by 6.1 percent by CIC.

The Captains’ and P&GI’s holding in JKH as at present is approximately 18.7 percent.
As a result, CIC now holds 25.3 percent of the voting rights in JKH through the contractual agreement.
“As per paragraph 5 of LKAS 28 - investments in Associates and Joint Ventures, Significant Influence is presumed to exist when an investor holds, directly or indirectly (e.g. through subsidiaries) 20 percent or more of the voting power of another entity. 

Accordingly, CIC has determined that CIC exercises significant influence on JKH and therefore, permitted to treat JKH as an associate company in terms of Sri Lanka Accounting Standards, only to the extent of the percentage of shares effectively held by CIC in JKH,” the filing said.

Hence, the filing said, CIC will apply equity accounting only in respect of CIC and its subsidiaries’ holdings in JKH currently accounting for approximately 6.1 percent of the issued shares or the percentage of shares effectively held in JKH at that time from the quarter ending December 31, 2023. 

In other words, from the December 31, 2023 quarter, CIC will use equity accounting for its investment in JKH, which currently represents about 6.1 percent of the total shares issued by JKH.
This could make CIC’s financial statements more attractive, with 6.1 percent of JKH’s profits being reflected on CIC’s accounts. Nevertheless, the profits will only appear on CIC’s financial records, and they will be in the form of non-cash gains.

Interestingly, neither CIC nor Captains hold a board seat on JKH.

Market analysts anticipate that JKH’s profits will significantly increase in the upcoming years due to the gaming operations the group plans to establish at its flagship Cinnamon Life complex.