Sinhaputhra Finance says working with CB to meet regulatory needs

Wednesday, 4 September 2019 00:25 - - {{hitsCtrl.values.hits}}

Company says capital augmentation plan submitted to be considered by Monetary Board

Sinhaputhra Finance PLC (SFPLC) yesterday said the Central Bank was considering its capital augmentation plans, and would submit them to the consideration of the Monetary Board, to fulfil regulatory requirements and foster continued growth.

SFPLC on Tuesday said it had received a communique from the Central Bank of Sri Lanka (CBSL), in the form of a warning, which could even lead to the cancellation of the company’s licence on the grounds of non-compliance with CBSL requirements. However, it further stated that the company has the options to file objections, and accordingly the company has forwarded its objectives clearly, which the Monetary Board has already acknowledged.

Further, in response to the objections filed, the Central Bank by letter dated 2 September 2019 has informed SFPLC that the objections tendered and the capital augmentation plan submitted to the Monetary Board were being reviewed, and will be submitted for the consideration of the Monetary Board at an earliest date, the Finance Company said in a statement.

“It was observed that the meeting with the investor was successful, and therefore the capital augmentation plan could commence without further delay. Sinhaputhra Board of Directors accepts the requirements laid down by the CBSL with regard to infusion of fresh capital,” it said.

It is clear that CBSL is focused on a new investor in order to fulfil the regulatory capital requirement, and hence a merger or capital infusion strategy is encouraged. Given that the current investment group fits that frame, and is also acceptable to SFPLC’s management, a smooth transition resulting in fresh capital infusion can allow Sinhaputhra to grow more.

The new investor is optimistic it will be the beginning of a new chapter for the only listed finance company which is, for all practical purposes, head-quartered outside Colombo, the statement added.

Sinhaputhra is a 40-year old finance company and, over the entirety of its existence, has been concerned with maintaining the trust and loyalty of its valued fixed deposit holders.

SFPLC maintains an unblemished track record for over 40 years in protecting and honouring its depositors. It has always been a profitable company, despite the present economic and the increasingly stringent accounting standards. This has been possible due to the company’s investments being solidly backed by assets.

SFPLC’s experience over 40 years of existence has shown that repayments are better and prompt when burrowers pledge valuable personal assets as security. It is because of this strategy that Sinhaputhra towers over peers in its interest liability to cash collections ratio net of early settlements at 4 to 5 times. Therefore, SFPLC’s liquidity buffers are way above regulatory requirements.

Further, it boasts of over Rs. 1.3 billion in valuable buildings and properties, approximately Rs. 540 million, in liquid cash reserves and access to over Rs. 1.2 billion in securitisable assets. Further, the company’s gross loan portfolio comprises of a much larger cash/gold or asset backed portfolio, which is nearly 87%. Therefore, liability of a Rs. 4.8 billion deposit base is quite manageable for a well-established player like SFPLC in the market.