Listed firms led by banks raise Rs.55.3bn via debentures in 2018

• BASEL III compliant debenture issues contribute 62% to corporate debt
• Net foreign outflow tops Rs.11bn; ASPI down 5.56%; S&P SL 20 index down 15.15%
• Market capitalisation as a percentage of GDP dropped to 21.2% from 21.8% in 2017

Sri Lanka’s listed corporates led by banks have raised a record Rs.55.26 billion via debentures in 2018, indicating a 176.3 percent year-on-year (YoY) growth in new corporate bond issuances.  

The commercial banks accounted for nearly 62 percent of corporate debt issuance via BASEL III compliant debenture issuances during the year as banks require a steeper increase in minimum capital ratios from January next year. 

The Commercial Bank raised a record Rs.10 billion via a BASEL III compliant debenture issues while Sampath Bank, DFCC Bank, Seylan Bank and Nation Trust Bank raised Rs.7.5 billion, Rs.7 billion, Rs.6.2 billion and Rs.3.5 billion, respectively. 

In the non-banking sector, Sri Lanka Telecom PLC raised Rs.7 billion via its senior, unsecured debenture issue in April. Hayleys PLC also raised Rs.5 billion via a five-year redeemable debenture issue in July. 

In addition, three non-banking financial institutes—Citizens Development Business Finance PLC (CDB), People’s Leasing & Finance PLC and LOLC Finance PLC raised Rs.2 billion, Rs.6 billion and Rs. 2.5 billion respectively. 

Meanwhile, the Colombo Stock Exchange (CSE) saw two initial public offerings (IPOs) during 2018—Jetwing Symphony Limited raising Rs.753.3 million and LVL Energy Fund Ltd raising Rs.1.2 billion.

However, foreign purchases of equities and debt declined sharply in both primary and secondary markets. Foreign sales expanded throughout the year, leading to a net foreign outflow of Rs.11.35 billion from both primary and secondary markets up to December 28. 

The CSE’s All Share Price Index came down by 5.56 percent during January 02 - December 28 period, while S&P SL 20 index declined sharply by 15.15 percent during the period. 

The average price/earnings (PE) ratio and price to book value (PBV) ratio or the market to book ratio continued to decline in 2018 as well, indicating that most stocks traded in CSE have got further undervalued this year. 

According to the data analysed by Mirror Business, the PE ratio has come down to 9.58 at the end of this year from 10.66 in 2017, while the market to book ratio declined to 1.19 end of this year from 1.31 in 2017. 

Stocks of automobile & components, real-estate, retailing and transport segments have the lowest PBV ratios indicating that these stocks are the most undervalued CSE stocks. 

The CSE recorded a market capitalisation of Rs.2, 822 billion as of December 28, down from Rs. 2, 899.3 billion recorded in 2017. 

Further, the market capitalisation as a percentage of GDP dropped to 21.2 percent when compared with 21.8 percent recorded in 2017 and 30 percent in 2014.