Multi Finance says working towards fulfilling Rs.2.5bn capital requirement

Multi Finance PLC has long been eying a capital injection running into at least a couple of billions, which will help it to come out from the Colombo Stock Exchange’s (CSE) Watch List and to meet the enhanced regulatory capital requirements. 

Multi Finance, a Fairway Holdings company, was transferred to the Watch List with effect from last July, after an independent auditor raised concerns about the company’s going concern, due to its failure to meet the minimum core capital stipulated by the Central Bank in a 2017 directive. 

In the Finance Business Act Direction on Minimum Core Capital issued by the Central Bank in February 2017, a step-up in minimum core capital levels was mandated, starting 
from 2017. 

In the same circular, the regulator vowed stern punitive actions and no regulatory forbearance on those who fail to live up to the stipulated levels of minimum capital, including caps on deposit liabilities and borrowings, freeze on dividend payout and restrictions on business expansion.

According to the 2017 circular, a licensed finance company was required to have Rs.1 billion in core capital by January 1, 2018, with a Rs.0.5 billion increase in every following year, until the core capital reaches Rs.2.5 billion by January 2021.

In the same month, where Multi Finance was demoted to the Watch List, its Chairman Kuvera De Zoysa said with confidence that they would not only meet the capital requirements for 2019 but also for 2020 in a matter of months. 

“Working in close concert with the regulator, we have been prudent in selecting an investor capable of fulfilling Multi Finance’s entire capital requirement with a single and substantial investment. 

This means that over the course of the coming financial year, Multi Finance PLC will not only have achieved its core capital adequacy requirements for the current year but will also have reached compliance with the stated 2020 target of Rs.2 billion as well. 

This is a development, which will provide our organisation with the much-needed room to manoeuvre and adopt a substantially more aggressive approach to capturing market share and expanding our business. 

Once total compliance with the stipulated minimum core capital requirements is achieved in the next few months, we plan to move boldly forward with a paradigm shifting approach to financial services – one which sets a new benchmark for sustainability in business by directly linking all products and services with national goals on sustainable social and environmentally-friendly development,” De Zoysa stated in his annual review for the year ended March 31, 2019.

However, eight months have lapsed, the company is yet to deliver on its promises.

In a fresh disclosure to the CSE, the company this week said it was diligently working on fulfilling the full capital requirement of Rs.2.5 billion and is closely engaged with the Central Bank to complete the required process of capital infusion. 

For the nine months ended on December 31, 2019, the company lost Rs.88.3 million, up from Rs.29 million in the corresponding period in 2018. 

Fairway Holdings (Pvt.) Limited has a 64.75 percent stake in Multi Finance while Entrust Holdings Limited has a 30.22 percent stake.