Minority shareholders show tepid interest towards Softlogic Finance rights issue

The minority shareholders of Softlogic Finance PLC showed lukewarm interest towards the firm’s Rs.602 million rights issue, which prompted Softlogic Capital, its immediate parent company, to chip in by buying the unsubscribed rights. 

Softlogic Finance, the licensed finance company of the Softlogic group, announced a rights issue of 12 shares for every 23 shares held, at Rs.17 per share, to raise capital to strengthen its capital adequacy ratios. Softlogic Finance’s share was trading at Rs.17.80 yesterday, up 7.9 percent. 

At the time of the announcement, the company stated its immediate parent company had agreed to fully undertake and subscribe and pay for any unsubscribed shares of the rights issue. 

The company issued 35.44 million shares, of which 83 percent was allotted to Softlogic Capital PLC by the close of the issue in December 2019, which held a 66.83 percent stake in the firm as at September 30, 2019. 

This is a clear indication that the minority shareholders of Softlogic Finance have not fully subscribed to their entitled rights issue shares. 

However, the issue ended in December 2019 with the rights issue being fully subscribed. 

Prior to the rights issue, Vanik Incorporation Limited held a 7.91 percent stake in Softlogic Finance while high-net-worth investor Dammika Perera held a 4.82 percent stake, followed by his licensed finance company LB Finance PLC with a 3.08 percent stake. 

It is not surprising for Perera and other minority shareholders to not to subscribe to the rights issue as the banking and finance sector returns took a battering during the last two years, which did not justify any additional investments. 

The banking and finance sector earnings soured with the growth coming to a standstill, rising non-performing loans and implementation of higher capital buffers. 

The Central Bank is on a mission to enhance the minimum capital levels of the banks and finance companies.  

During the six months ended on September 30, 2019, Softlogic Finance PLC reported earnings of Rs.41.3 million, compared to Rs.61.04 million reported for the same period in the previous year.  

The company had an asset base of Rs.22.3 billion as at end-September.