Veteran tea planter leads consortium to acquire Sinhaputhra Finance

Veteran tea planter and manufacturer, Harith Ranasinghe, who is also the Immediate Past President of Sri Lanka Tea Factory Owners Association (SLTFOA), has led a consortium of investors to acquire Sinhaputhra Finance PLC (SFL).

According to the mandatory offer document submitted to the Colombo Stock Exchange (CSE), Ranasinghe serves as the Chairman of Singhe Capital Investment Limited (SCIL), which acquired the controlling stake of SFL recently.

SCIL has been incorporated on July 27, 2019 as a special purpose vehicle with the intention of acquiring SFL’s controlling stake.
The four shareholders of SCIL Harith Ranasinghe (Chairman) and Directors Maheen Priyantha, Lasantha Ranasinghe and Vijitha Lokunarango daown 25 percent of the 
company each.

On December 5, 2019, SCIL acquired 31.6 million SFL shares representing 50.31 percent of voting rights of the firm from its major shareholder Ravana Wijeyeratne at a price of Rs.9.50 per share, amounting to a total consideration of Rs.300.9 million.
Since the deal crossed the 30 percent regulatory threshold, SCIL has announced a mandatory offer to acquire the remaining shares of SFL at Rs.9.50 per share.
The number of remaining ordinary voting shares, which are subject to the offer, is 31.2 million or 49.7 percent of the issued SFL shares, amounting to Rs.297.2 million.
But certain SFL shareholders holdings 19.9 million shares representing 31.65 percent have given undertakings to SCIL that they would not accept the offer.
Hence the total maximum cash requirement of SCIL to fulfil the obligations under the offer would amount to only Rs.107.8 million. 
The first closing date of the mandatory offer is January 
24, 2020.
SCIL is expected to inject capital into SFL 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 last July, considering its critical financial situation and continuous non-compliance with regulatory capital requirements. 
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.