SDB bank to issue up to 88mn new shares via secondary public offering

• Aimed at further improving lender’s capital adequacy 
• Also to partly finance envisaged growth in loan portfolio
• Issue price to be announced 3 market days prior to EGM

SANASA Development Bank PLC (SDB bank) plans to issue up to 88,000,000 new ordinary voting shares to the public, via a secondary public offering (SPO), with a view to further improve the bank’s capital adequacy ratios and to partly finance the envisaged growth in the loan portfolio in the near term.

“The SPO under consideration constitutes of an invitation to the public, by way of a prospectus, to subscribe up to sixty eight million (68,000,000) new ordinary voting shares of the bank (initial issue) and in the event of an oversubscription of the initial issue, to issue up to a further twenty million (20,000,000) new ordinary voting shares of the bank at the discretion of the board of directors of SDB (further issue), resulting in a total issuance of up to eighty eight million (88,000,000) new ordinary voting shares of the bank (total issue),” the bank announced in a market disclosure yesterday.

It noted that the board of directors of SDB, at a meeting held yesterday, resolved to raise further capital through the issuance of new ordinary voting shares to the public via the proposed SPO.

The bank is scheduled to announce the issue price three market days prior to its Extraordinary General Meeting (EGM), where it plans to obtain its shareholder approval for the issuance, based on the one-month volume weighted average price (VWAP) of its shares. 

SDB bank shares closed at Rs.56.20, down 1.4 percent or 80 cents, yesterday.

“As required by the Companies Act No.7 of 2007, the board also resolved that in its opinion, the price at which the new ordinary voting shares to be issued via the SPO, i.e. the one (01) month VWAP for the period ending on the price determination date, would be fair and reasonable to the bank and all its existing shareholders,” SDB stated. 
The bank plans to use the proceeds of the proposed SPO to further strengthen its equity base and thereby improve the regulatory capital adequacy ratios, in line with the Basel Ill guidelines of the Central Bank.

Further, the bank also plans to partly finance the envisaged growth in its loan portfolio during FY 2021 to FY 2022 with the proceeds. 

SDB bank noted that it may allot the new ordinary voting shares under the proposed SPO on a preferential basis, to identified investor/s and to the existing shareholders of SDB, as decided by the board of directors of SDB, in consultation with the CSE.

“The new ordinary voting shares to be allotted through the issue shall upon due payment rank equal and pari passu in all respects with the existing ordinary voting shares of the bank, including the right to participate in any dividend declared upon the final allotment, which shall be after the last date of acceptance and payment and subject to the limits set out in the Banking Act No. 30 of 1988 (as amended),” the bank noted. 

The current stated capital of SDB stood at Rs.7.77 billion, represented by 91,576,032 ordinary voting shares, with a market capitalisation of Rs.5.14 billion.

SDB bank reported earnings of Rs.11.02 per share in the 2020 financial year, compared to Rs.4.50 per share in the preceding financial year.

High-net-worth investors Dr. T. Senthilverl and Prabhash Subasinghe are among top two shareholders of the bank, holding over 13 percent and 12 percent stakes in the bank. 

The Dutch development bank (FMO) is the third largest shareholder of the bank, with a 10 percent stake, followed by the International Finance Corporation (IFC), which has a 5.9 stake.

The proposed issue will be subjected to the shareholding restrictions in the Banking Act No. 30 of 1988 (as amended), the CSE approval and obtaining the shareholder approval at an EGM.