Brussels-based BIO pre-books 20% of SDB bank’s SPO with Rs.925mn investment

Brussels-based Belgian Investment Company for Developing Countries (BIO) has entered into an agreement with Sanasa Development Bank (SDB bank) to subscribe to 20 percent of the bank’s upcoming secondary public offering (SPO) by investing Rs.924.82 million, for a 10 percent stake of the bank. 

According to a market disclosure filed with the Colombo Stock Exchange (CSE), the two entities inked up an Investment Agreement on the 9th of this month.

“SDB Bank has entered into an investment agreement with BIO to allocate to BIO new shares to be issued under the SPO that will result in BIO owning a shareholding in SDB bank, representing 10 percent of the total issued share capital of SDB bank post SPO,” it stated. 

BIO invests in private sector projects in developing and emerging countries, either directly or through investment funds and/or financial institutions.

SDB bank has announced plans to issue up to 88 million new ordinary voting shares, priced at Rs.51.50 per share, to the public, via an SPO in two tranches—initial issuance of 68 million shares, followed by further issuance of 20 million shares in the event of an oversubscription of the initial issue.

The resolution was approved by the shareholders of the bank at the Extraordinary General Meeting held on May 28. The SPO is likely to take place by the end of this month, as per company sources.

According to SDB bank, BIO has agreed to subscribe to 17.9 million new shares of the SPO, at the issue price of Rs.51.50 per share, amounting to an investment of Rs.924.82 million, assuming a full subscription of the total issue subject to the limits set out in the Banking Act No. 30 of 1988 (as amended).

“The proposed investment by BIO would, if completed, result in the subscription of approximately 20 percent of the SPO, assuming full subscription of the total issue,” SDB bank noted. In 2019, SDB bank secured a euro 9 million loan from BIO. The loan allowed the bank to strengthen its capital and grow its MSME loan portfolio.

SDB bank CEO Thilak Piyadigama last month revealed that at least two development finance institutions (DFIs) had expressed interest in taking part in the bank’s upcoming Rs.4.53 billion SPO, which is likely to be the last capital raising endeavour by the bank for the next several years.

With the proceeds from the upcoming SPO, SDB bank plans to double its capital base to around Rs.21 billion by 2024 (inclusive of cumulative profits), as the bank prepares itself for a possibility of an introduction of a single banking licence through the New Banking Act, which is expected to be enacted in mid-next year.

SMEs make up 41 percent of SDB bank’s loans and advances portfolio and it plans to set up a specialised division within the bank to reach masses with new products, in particular targeting the agriculture sector and other local industries.

Over the next three to five years, SDB bank is also planning to enter several Asian countries, using technology platforms.

As of March 31, Dutch Development Bank (FMO) was the largest foreign shareholder of SDB bank, holding a 10 percent stake, while the International Finance Corporation (IFC) and Singapore-based SBI-FMO Emerging Asia Financial Sector Fund had 5.9 percent and 3.1 percent stakes, respectively. 

Leading businessman Prabhash Subasinghe-controlled Ayenka Holdings (Pvt.) Ltd was the single largest shareholder of SDB bank, with a 12.4 percent stake, followed by Senthilverl Holdings (Pvt.) Ltd, owned by high-net-worth investor Dr. T. Senthilverl, with a 11.5 percent stake in the bank. (NF)