Singhe Capital Investment acquires controlling stake in Sinhaputhra Finance

• Singhe Capital consists of tier-two level investors : sources
• Will infuse further Rs.2.23bn during several stages to beef up capital

Singhe Capital Investment Limited yesterday acquired the controlling stake in Sinhaputhra Finance Limited PLC (SFL) for Rs.300 million as part of a capital infusion deal involving the Kandy-based finance firm.

During early trading hours, the market saw a crossing of little over 31.6 million SFL shares at Rs.9.50 a share, down 20 cents from the previous close.

The seller of the shares was SFL Managing Director/CEO Ravana Wijeyeratne, who held the exact quantity of shares, which amounted to 50.31 percent of the issued shares of the company. “The buyers of the shares were a consortium of investors consisting of tier two-level investors,” stock market sources familiar with the deal said. The deal was structured by NDB Investment Bank (NDBIB).

The new buyers are expected to announce a mandatory offer to purchase the remaining shares of SFL as the deal crossed the 30 percent threshold. 

The new investors are also expected to inject capital into the firm as per the deal to beef up its regulatory capital buffers in line with Central Bank’s requirements. 
The Central Bank had issued a notice of cancellation of license to SFL this July, considering its critical financial situation and continuous non-compliance with regulatory capital requirements. 

In response, SFL with the new consortium of investors had submitted plans for a capital infusion strategy in August, which the Central Bank had accepted. 

 As a result, the regulator had decided against proceeding with the cancellation of license. 

According to SFL’s annual report, the new investors have agreed to infuse Rs.2.23 billion to the stated capital of the company in several stages through rights issues and internally generated eligible reserves.

As at September 30, 2019, SFL had total assets of over Rs.6.5 billion. The net asset value per share of the company was Rs.14.94.

The firm’s core capital adequacy ratio as at end-September was 1.02 percent, down from 1.76 percent six months ago, against a regulatory requirement of 7 percent. 
The total capital adequacy ratio was 1.28 percent, significantly down from 5.88 percent six months ago, against the regulatory requirement of 11 percent.

For the six months ended September 30, 2019, the company made a net profit of Rs.22.5 million, slightly down from Rs.23.9 million made for the same period last year.

The firm had retained losses of Rs.156.3 million as at end-September, down from Rs.183.2 million six months ago. The gross bad loans ratio as at end-September stood at as high as 24.5 percent.

SFL has 245 employees and operates eight branches and two service centres.