LCB Finance’s Rs.500 million IPO expected within this month

Non-bank financial institution (NBFI), LCB Finance plans to open its Rs.500 million Initial Public Offering (IPO) on the Colombo Stock Exchange (CSE) within this month, offering 15.82 percent stake or 125 million shares, at Rs.4.00 each. 

LCB Finance is expecting to raise Rs.300 million offering 10.13 percent stake of the company as an initial tranche with plans to raise further Rs.200 million through a ‘greenshoe’ over-allotment option, which is designed to offset a share price fall upon listing.

In line with this, the major shareholder of the company, Lanka Credit and Business Limited (LCBL), has already given an undertaking to LCB Finance to subscribe any unsubscribed shares under the initial issue and/or further issue up to a maximum of 50 million shares amounting to Rs.200 million.

NDB Investment Bank has been appointed the financial advisor to the issue.

The company’s listing on the CSE is aimed at fulfilling its regulatory core capital requirement, strengthening its capital base and growing its loan portfolio. 

LCB has eight branches and has assets worth Rs.3.7 billion including Rs.2.28 billion in loan book as at end of FY2021. With an aim to broaden its   geographical coverage beyond Southern and Western Provinces, the company plans to expand its branch network to 38 branches by 2026.

Initially, LCB’s parent, LCBL commenced operations providing financing to the under-banked population of the Southern Province. In 2018, LCBL acquired 72.39 percent stake in City Finance Corporation Limited (CFCL), which was under the management of the Central Bank (CB) due to its inability to settle the outstanding amounts to existing depositors, and consequently, it was renamed as LCB Finance.  Since then, LCB Finance has been able to consistently outperform the asset growth of the industry with a 3-year compound annual growth rate (CAGR) of 113.3 percent.

Upon full subscription of the proposed IPO, LCBL’s shareholding in the firm is expected to reduce to 70.58 percent from current 84 percent. 

The top shareholders of LCBL include the Nanayakkara Family, NEM Constructions, UKG Main Group of Companies, Maweli Group of Companies, Kabalana Hotels, Narangoda Group of Companies, Trans Line GMBH Germany and other members of Southern Business Community.

Helios Ventures (Private) Limited is the second largest shareholder of LCB Finance with 7 percent stake and its shareholding upon fully superscription of the proposed IPO would be reduced to 5 percent.