SRU warns of potential delays as SOE divestiture progresses

• SRU Director General Suresh Shah warns of potential delays during valuation phase
• Says initial focus on sale-side due diligence to address identified SOE challenges
• Stresses the objective is to achieve a “clean” enterprise before proceeding

By Shabiya Ali Ahlam

Transaction advisors appointed for the divestiture of seven State-owned enterprises (SOEs) have already kicked off, the process, though State-Owned Enterprises Restructuring Unit (SRU) Director General Suresh Shah cautioned that there might be potential delays in the valuation phase as the process unfolds.

The transaction advisors have started with the sale-side due diligence given that there are several challenges identified with the SOEs that require deeper understanding, and in some instances, “fixing” before moving forward.
Shah stressed that the fixing of the identified pressing challenges is key as the objective is to move forward with a transaction of a “clean” enterprise.

For SriLankan Airlines Ltd., Lanka Hospitals Corporation PLC, and Sri Lanka Telecom PLC, the appointed transaction advisor is the International Finance Corporation (IFC), a member of the World Bank Group.
Deloitte Touche Tohmatsu India (Deloitte India) serves as the transaction advisor for Litro Gas Ltd (including Litro Gas Terminals Ltd) and Canwill Holdings Ltd.

Colliers International Consultancy and Valuation (Singapore) Ltd and Platinum Advisors have been selected as the transaction advisors for Hotel Developers Lanka Ltd (Hilton).

Alvarez & Marsal Middle East Ltd., and Capital Alliance Partners LTD are the transaction advisors for Sri Lanka Insurance Corporation Ltd (SLIC).

The transaction advisors were approved by the Cabinet in July 2023. According to Shah, following the due diligence step will be the valuation, which will be carried out by both the transaction advisors, and the Chief Government Valuer. 

He noted that delaying could be expected at this stage if the valuations presented by the transaction advisors and the Chief Government Valuer are not in sync, bringing on new hurdles in the reform process.
“Ideally, hopefully, we will have a scenario where both entities can come up with very, very similar valuations. Otherwise, we will have to spend time sorting that out,” Shah told a virtual forum hosted by CAL, a Colombo-based investment banking group. 

Although the SOE restructuring process is not moving forward at the expected pace, Shah pointed out that the efforts of SRU are yielding positive results as it has been successful in appointing transaction advisors for not one, but all the seven SOEs.

“Since 2005, which was something like 18 years ago, this is the first time that we managed to even appoint transaction advisors. So, there are some significant positive changes that are indeed taking place,” 
he said.

Meanwhile, Shah shared that the Expression of Interest (EOI) for Canwill Holdings and Hotel Developers Lanka will be issued by September 15. Whereas for Lanka Hospitals, the EOI will be issued by end of September, or first week of November.