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NDB Chairman Eshana de Silva (left) and Norwegian Ambassador Trine Jøranli Eskedal exchanging a symbolic agreement signed on Friday at the latter’s residence as NDB Group CEO Dimantha Seneviratne looks on – Pic by Ruwan Walpola
By Nisthar Cassim
In a major breakthroug-h NDB has signed an agreement with Norway’s development finance entity Norfund which will see the latter taking up a 9.9% stake and boosting the Lankan bank’s growth and expertise to empower the private sector.
Heralding many firsts and major significance, Norfund under the deal will be making its maiden equity investment in Sri Lanka whilst it will be also the first investment in Asia in 2021. It is also NDB’s first foreign equity placement agreement.
Norfund will participate in the NDB’s upcoming Rights Issue for Rs. 8 billion (announced in October 2020 at Rs. 75 per share) by way of subscribing to unsubscribed rights and also by way of a private placement if required at Rs. 82.50 per share which reflects a 10% premium on Rights Price. In the event Rights Issue is fully subscribed by existing shareholders, realisation of Norfund commitment would see NDB’s capital being boosted by Rs. 11 billion. This will increase its foreign shareholding percentage to around 21%.
The Norfund investment is subject to other conditions, including regulator and shareholders approvals.
A symbolic agreement to this effect was exchanged between Norwegian Ambassador Trine Jøranli Eskedal and NDB Chairman and young business leader Eshana de Silva.
NDB described the Norfund investment as a game changer, as the latter will extend technical expertise where necessary in areas of private sector development especially SME sector, financial inclusion and digital technologies. NDB will also have access to a vast pool of long term funding from Norfund which has $ 2.8 b investments in 163 projects in a number of countries and has defined 29 core strategy countries in Asia, Africa, and Latin America.
“This investment comes at a time when most of the world is facing external macro-economic challenges especially due to the global COVID-19 pandemic with rating downgrades etc. In that context it is extremely heartening to see we have Norway and its Norfund who believe in the resilience of NDB and Sri Lanka,” De Silva said.
NDB is one of the fastest growing and the fourth largest listed commercial bank with assets growing by 18.4% in 2020 to Rs. 632.1 billion.
Norwegian Ambassador Eskedal said: “I believe that this is a good indication of the faith and trust Norfund has placed on the Sri Lankan private sector, and I hope it conveys a positive message to other potential investors in Sri Lanka, in particular in this challenging time.”
Sri Lanka was added to Norfund’s list of mandated countries in 2019 and before NDB it had invested in debt of Softlogic Life.
NDB Chairman de Silva described the Norfund investment as a momentous occasion for the bank given the challenging times amidst global COVID-19 pandemic.
However he said that NDB in 2020 continued its growth momentum showcasing a robust 21% growth in deposits, 8% growth in loans and advances and an 8% growth in after tax profit.
“As we evolve we understand we need a long-term partner with shared goals and bring in added expertise and support. I am indeed delighted that Norfund is that ideal partner for NDB.
“Our aspirations to create an economic revival by encouraging financial inclusion and sustainable exports driven SMEs will get a big boost with Norfund investment and technical assistance. I believe driving sustainable development is one of the Norfund’s objectives and help boost Sri Lanka’s competitiveness,” NDB Chairman emphasised.
He also said Norway has been a key development partner of Sri Lanka with assistance worth 5 billion Norwegian Krone (around Rs. 115 billion). 
“The two countries too have had strong cooperation between the private sectors. I hope with this investment we will see more cooperation of this nature in other sectors of the economy as well. Norfund investment shows the confidence it has not only on NDB but Sri Lanka. We are certain that you have made a good investment,” de Silva added.
He also said that the NDB team worked extremely hard to support our clients and build businesses.
NDB Group CEO Dimantha Seneviratne said: “We are extremely happy to have the opportunity of partnering with a DFI such as Norfund as it seeks to support the SME sector in reviving our economy.” “The values Norfund will bring in terms of technical assistance, long-term funding, know-how etc will help the bank and the country overcome the current challenges,” he added.
“As NDB strives to improve financial inclusion by promoting digital technologies, Norfund can make available its experience and technical assistance to help NDB improve in this area. Further on the back of the numerous global awards the bank has received in the recent past, this was a further endorsement of NDB’s strong sustainable growth model and our close alignment to global standards,” Seneviratne said.
The NDB Group MD also said the equity infusion together with the proposed Rights Issue will help buttress the Tier I capital of NDB bank enabling it to continue its growth momentum and support the economic revival in a post COVID environment.
He said with one of the best Cost to Income Ratios in the industry, NDB continues to leverage on its technologic investments to deliver sustainable returns for the Bank, customers and other stakeholders.
Norfund Regional Director for Asia Fay Chetnakarnkul said: “Financial inclusion is critical to support economic growth, job creation and reduce poverty in Sri Lanka. Norfund is pleased to support NDB’s growth strategy that targets small and medium-sized businesses. This is aligned with Norfund’s mandate. We recognise and appreciate that NDB has a strong management team and a competent board who share our value in upholding high environmental, social and governance standards.”
“Norfund is a long term investor with no fixed exit horizon,” said Fay, joining via video conferencing.
She said Norfund has around $ 1 billion in investments in Asia and confirmed the NDB deal was the first for 2021.
Norfund is the Norwegian Investment Fund for developing countries, which is owned and funded by the Norwegian Government. Norfund is the Government›s most important tool for strengthening the private sector in developing countries and thereby contributing to economic growth, job creation and poverty reduction.
Ambassador Eskedal said financial inclusion is critical to support growth and to reduce poverty and vulnerability. “Investing in financial institutions, like the NDB, and thereby contributing to increased access to capital for small and medium-sized companies, is therefore one of the main investment areas for Norfund,” she added.
She said Norfund’s utmost ambition is to actively support NDB to achieve its vision of becoming “the driving force for a financially empowered Sri Lanka”.
In addition to supporting the SMEs sector and promoting financial inclusion of the unbanked in Sri Lanka, Norfund will provide technical assistance and global expertise assisting the bank to promote global environmental and social standards, and to achieve best in class corporate governance. Another significant contribution from Norfund is to support NDB on its way forward to further strengthen its already excellent reputation in the market, both locally and internationally, Ambassador Eskedal said.
Norfund prioritises investments in four investment areas aligned with the UN›s Sustainable Development Goals; Clean Energy, Financial Institutions, Green infrastructure, and Scalable enterprises. NDB Bank awarded the best bank in Sri Lanka 2020 by the Banker Magazine UK, is the first and to date the only corporate in Sri Lanka to officially be certified with EDGE Certification (Economic Dividend for Gender Equality).
