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Showing posts with label Market News. Show all posts

People’s Insurance eyes non-captive market post IPO

People’s Insurance Ltd. (PIL) has put down its game plan post the Initial Public Offering (IPO) to garner non-captive market share, a senior official said. PIL Managing Director D.P. Kumarage told that the management has proposed to take full use of the island-wide branch network of its immediate holding company People’s Leasing and Finance Plc (PLF) and parent company People’s Bank to strategically capture its non-captive market share.

“We want to expand our business. We have not used our island-wide branch network of People’s Bank fully yet and also we have not gone to non-captive business, so we will go into that. PLF has 90 branches and we have made use only about 70 branches for the captive business. In the non-captive business we have not made use of even 10 branches. We need to increase that and our intention is during the first half of the next financial year we will be bringing at least 50 branches under the non-captive business,” he said.

People’s Insurance has achieved a post-tax profit of Rs. 371 million during the first 10 months of this year backed by an outstanding underwriting profit of Rs. 208 million during the same period. The assets as at end October 2015 stood at Rs. 5.2 billion while the investment portfolio exceeded Rs. 4 billion.

People’s Insurance successfully completed its last financial year wherein the profit after tax increased by 21% to reach Rs.450 million supported by the outstanding growth in underwriting profit of Rs. 152 million and significantly increased fair value gains from listed shares. The financial position was strong with total assets of Rs. 4.8 billion and net assets of Rs. 1.4 billion which is an increase of 18% over the previous year.

When asked if there would be additional costs which would incur due to the expansion, he said that once PLF branches reach their critical mass, the company wishes to open up new branches in strategic locations to stay ahead its peers in the operational cost platform.

“Our expense ratio is very low because we are operating through a window. When the window is not possible to operate any further within a branch only then we will think of having a separate branch. We will operate along the same model when it comes to expenditure.”

Taking a positive stance on regulatory sentiments to consolidate the insurance market, Kumarage said that with the composite companies being separated, smaller companies may find it difficult to compete with larger companies. “They will not be able to compete with the Gross Written Premium (GWP) and they won’t have the capacity to increase their equity. So automatically there will be consolidation taking place.”

PIL also hopes to increase market share in the motor segment while focusing on growing non-motor general insurance products which are expected to be in demand with the growth market trajectory.

Elaborating on PLI’s stance to consolidate, he highlighted that the company has no immediate interest to merge or acquire any entity as its still concentrating on a growth strategy. However he noted that if the price is reasonable PLI might consider the option.

People’s Insurance’s Rs. 750 m IPO to open on 16 December
Subsequent to CSE approval, People’s Insurance Ltd. will open its IPO on 16 December and is expected to raise Rs. 750 million by offering 50 million ordinary shares of the company at Rs. 15 per share.

The IPO shareholder percentage is measured at 25% while People’s Leasing and Finance will own 75% of the company’s equity stake amounting to 150 million shares. The issue closing date is scheduled on 7 January or the earliest day on which the issue becomes oversubscribed.

Acuity Partners Ltd., NDB Investment Bank Ltd. and People’s Bank – Investment Banking Unit are acting as the Joint Financial Advisors and Managers to the Issue whilst People’s Bank is the Bankers to the Issue. F. J. & G De Saram functions as the Lawyers to the Issue whilst SSP Corporate Services Ltd. functions as the Registrars to the Issue.

According to the Regulation of Insurance Industry (Amendment) Act No. 3 of 2011, every insurance company in existence when the said Act came into operation is required to have itself listed on a stock exchange within five years from the effective date of the said Act. Accordingly, the company’s shares have to be listed before 7 February 2016.

Hence People’s Insurance will be the first general insurance company in Sri Lanka to adhere to the listing requirement under the amended RII Act.

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Listed firms that don’t transact, on CSE / SEC radar

Listed firms that don’t transact, on CSE / SEC radar

The Colombo Stock Exchange (CSE) and the capital market regulator, the Securities and Exchange Commission (SEC) are concerned about some listed firms that have never been traded or only have had a few trades, since they went public a few years ago.”The SEC is going though the history of these firms and the CSE will try to entice them to be more active in trading,” a source told. Some were listed about two years ago, through introductions, which are a less-expensive alternative to an initial public offering (IPO). An introduction does not result in shares being traded on the main exchange board, but the Diri Savi Board. With introductions, a company sells equity shares directly to the public without the help of investment bankers.

Aitken Spence Plantation (ASPM) for an example is one such firm that was listed in May 2013 and a single trade hasn’t happened. Its public float is 11.78 per cent. AMW Capital Leasing is another. It’s Public freefloat is stated as 10 per cent, but the share has never traded since listing via introduction on 8 June 2011. “This raises questions as to whether it should still be on the CSE,” analyst said. AMW Capital Leasing is another such company which hasn’t seen a single trade. The CSE and the SEC are presently scrutinising such companies and are likely to have discussions with them on the next plan of action,” the source said. Others say that some firms merely go public for price discovery and that once listed aren’t bothered to trade. “But it isn’t a good reflection on the CSE,” the analyst said
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Hemas interest on Lanka Hospital PLC


Sri Lanka’s diversified conglomerate Hemas Holdings has expressed interest in acquiring a stake of state-owned Lanka Hospitals Corporation.


In a stock exchange filing the company said they noted the interest expressed by the Government in disposing of shares in ventures such as Lanka Hospitals Corporation PLC.

“Hemas as a group has been exploring opportunities in the sectors that we operate in,” the company said.

Hemas Holdings have been in the healthcare sector with Hemas Hospitals since the launch of their first hospital in Wattala in 2008.

“We have therefore, expressed our interest in pursuing this opportunity once the government initiates the official process,” the company said.

As at the end of last year, 54.61 percent of Lanka Hospitals Corporation was owned by Sri Lanka Insurance Corporation and 28.66 percent was owned by Fortis Global Healthcare Holdings private limited.

Lanka Hospitals Corporation posted a net profit of 510 million rupees for the last year compared to 677 million rupees recorded in the previous year.

Basic earnings per share of Lanka Hospitals Corporation which commenced operations in 2002, under the name of Apollo Hospitals was 2.28 rupees in 2014.

The Government is to exit partially or fully from investments in Lanka Hospitals, Colombo Hilton, Hyatt Residencies, Waters Edge, Grand Oriental Hotel, Ceylinco Hospital and Mobitel by listing such investments in the CSE during 2016.
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Colombo Stock Exchange Establish a Central Counter Party

Sri Lanka's bourse, the Colombo Stock Exchange (CSE) announced the proposed establishment of an Institution to act as a Central Counter party for all secondary market transactions on the CSE.

The institution which is a 100 percent owned company of the CSE will act as a Central Counter Party (CCP) and guarantee settlement of cash and delivery of securities for all secondary market transactions on the CSE.

The CSE said it is a ground breaking initiative launched with the approval of the Securities and Exchange Commission of Sri Lanka (SEC) to set up a Clearing Company to act as a Central Counterparty to guarantee settlement of Equity and Corporate Debt securities traded on the CSE to address a key risk prevalent in the Colombo Stock Market.

Presently for equity securities the delivery of shares from the seller to the buyer occurs immediately upon execution of the share transaction while the fund settlement to the seller takes place only after 3 market days from the transaction date (T+3), thus exposing the seller to a 3 day settlement risk.

Although certain stringent measures have been imposed by the CSE over the years to minimize the settlement risk and none of the Stock Brokers and Custodian Banks have defaulted payments, the globally accepted mechanism for minimizing the settlement risk is through a Central Counter Party system under a Delivery Vs Payment (DVP) settlement environment where the securities and funds are exchanged simultaneously, finally with full irrevocability on the settlement day.

This initiative to set up a Central Counter Party (CCP) system would bring the CSE closer to its goal of achieving a world class status. CSE says it is a major development of the post trade market infrastructure of the CSE and would be the most significant development of market infrastructure at the CSE since the Automation of Trading in 1997.

The initial steps prior to the CCP project which commenced in 2014 with the commissioning of the state of the art new generation Central Depository System moved to its second phase in 2015 with the development of new Broker Back Office (BBO) systems and Order Management Systems (OMS) which will be commissioned in full by March 2016.

The CCP project will now move into its third phase in December 2015 with the incorporation of a separate institution for the purpose of guaranteeing settlement and commence procurement of the necessary IT infrastructure and systems and the formulation of the rules and regulations and legislation to enable CCP.

In guaranteeing the settlement of a transaction the CCP would act as a buyer to the seller and the seller to the buyer in all secondary market transactions. This process is identified as novation which refers to the legal act of replacing the original contract between the buyer and the seller with two contracts between the buyer and the CCP and the seller and the CCP, i.e. the CCP substitutes itself as a counterparty to the transaction.

This does not mean that a CCP eliminates the default risk altogether, but will guarantee settlement by ensuring that it has sufficient resources to handle this risk through a range of exception handling mechanisms such as collateral in the form of margins and the ability to cover the delivery failures of securities through a Buy in mechanism, Stock Borrowing and Lending and, as a last resort, by way of a cash settlement.

A CCP system has been identified and recommended by International Organization of Securities Commissions (IOSCO) as the best practice to adhere for clearing and settlement.

A Central counterparty will strengthen the overall market integrity. Having a central counterparty in place is a requirement for CSE to be categorized as an emerging market exchange. In addition, to expand to other tradable derivative products such as a Futures and Options, a CCP is a necessity as the risks associated with the trading of such instruments are relatively high. Apart from the benefit of significantly minimizing the settlement risk in the stock market the establishment of a CCP will enable the CSE to commence the next ground breaking initiative of establishing a derivatives market in Sri Lanka.

The regulatory approvals from the SEC for the project have been obtained. The new Company which will act as a CCP which will be incorporated shortly will formally seek a license from the SEC.

The Consultants selected for the project are BTA Consulting (BTA) of the United Kingdom who are providing Consultancy and Project Management services to set up the Clearing House. BTA Consulting is a UK based consultancy firm specializing in capital market related assignments globally having specialists with exposure to most global capital markets.

The consultancy is being jointly funded by the CSE and SEC and the Central Bank of Sri Lanka also funded 1/3 of the consultancy fees of the initial phase. The infrastructure and IT systems would be made by the CSE.

The project to establish a CCP will be completed in the following 5 phases:
1) Requirement gathering & Inception Report; 
2) Procurement & Vendor Management; 
3) Legal, Regulatory & Operational Documentation; 
4) Operationalize CCP & Go Live; 
5) Post Live Period.

Phase 1 of the project has been completed and the Inception Report was approved by CSE and SEC. Phases 2 and 3 will run in parallel and is scheduled to start in December 2015.

The CSE expects to launch the CCP in January 2017 provided all the necessary regulations are in place.

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Alumex Group revenue growing 13%

The Alumex Group performed exceptionally well in the financial year ending March 31,2014, with revenue growing 13% to reach Rs. 2.8 billion. Profit before tax of the group was Rs. 464 million recording an increase of 23%. Profit after tax was reported as Rs. 379 million compared with Rs. 307million in the previous year.

2013 saw Sri Lanka's GDP grow by 7.3%, with the construction sector being a major contributor.

The construction sector grew at 14.4%, double the pace of aggregate GDP growth, driven by a continuing trend of investment in infrastructure, hotels and the residential sector.

Macroeconomic conditions were also conducive as interest rates declined, reducing cost of capital, whilst inflation was anchored at mid-single digit levels. Modest global economic growth ensured moderate commodity prices including that of aluminium, the key raw material for Alumex.

Encouraged by the growth in the construction sector, Alumex has invested further in its distribution network and expanded into new areas across Sri Lanka. The Group also made progress in its export ventures as revenue was increased in the Maldives and India.

Despite the strong growth in construction, the industry is not without challenges. There is also an ever present risk of low quality imports entering the market and it is important that the government is vigilant of this and takes steps to ensure that domestic industry does not suffer as a result.

Given the encouraging performance of Alumex since Hayleys acquired the Group in 2010, the company was listed in the Colombo Stock Exchange in March 2014 with an IPO of Rs 838 million.

- See more at: http://dailynews.lk/?q=business/alumex-group-profit-tops-rs-307-million#sthash.KWapbx6o.dpuf
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Airtel Lanka Discuss to sale Etisalat

Indian based Bharti Airtel is currently discussing to sell its Sri Lankan unit to Abu Dhabi based Etisalat, a media report said. The report says the talks are in an advance stage between the two parties, while Standard Chartered Bank is advising the Indian firm.

Airtel Lanka, which has a subscriber base of 1.7 million, has been valued between $110 million and $130 million, according to the report. Etisalat is Sri Lanka’s third-largest operator with 4.5 million subscribers and it will move up to the second spot if the deal goes through.

Responding to a questionnaire on the sale of its operations to Etisalat, Airtel said as a policy it didn't respond to market speculations. Standard Chartered declined comment while Etisalat could not be reached for comments. Sri Lanka reportedly has an addressable mobile market of about 22 million, with penetration levels of around 85%.

"In a country like Sri Lanka, an operator has to be either the largest or the second-largest to make money," 

while explaining why the deal was important for the Abu Dhabibased operator. Airtel's growth prospects in the island nation, on the other hand, were limited as it just had 1.7 million subscribers.

The company's subscribers have not grown in the past four quarters and despite investing over $300 million since 2007, the unit continues to make losses. "The Sri Lankan operation has been a cash guzzler for Bharti,'' 

While Bharti Airtel doesn't report the financial numbers for Sri Lanka separately, sources told ET that the company had posted revenue of Rs 320 crore for the quarter ended June 2013 and a net loss of Rs 190 crore.

The company, which entered the Sri Lankan market in 2009 as the country's fifth operator, offers 2G, 3G and 3.5G services in the island nation across all the 25 districts and it has built a distributor network of 40,500 retailers.

With a small population, the Sri Lankan market turned out to be a difficult game for India's largest telecom operator whose foray had begun with stiff resistance from the local operators in 2009.

Fearing the size and scale of Airtel's operations, incumbent operators had resisted giving interconnection to it, a trouble which later resolved. Airtel's operations were later mired in controversy as it tried to launch a price war in the market, which was later thwarted by the telecom regulator for being anti-competitive. 

Source :- The Economic Times


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