Asia Asset Finance to raise Rs. 414 m to boost capital

Asia Asset Finance Plc has announced plans to raise Rs. 414 million via a Rights Issue of convertible irredeemable five-year preference shares of Rs. 10 face value at a fixed non-cumulative dividend of 70 cents in any financial year. 

The move is to increase the core capital of the company in terms of Finance Companies (Minimum Core Capital) Direction No. 02 of 2017.

The current stated capital of the company is Rs. 1,791,478,691 represented by 124,195,533 ordinary shares. The basis will be in the ratio of one preference share for every three ordinary shares held, as follows:

• Number of preference shares to be issued by way of a rights issue shall be 41,398,511 preference shares at a consideration of Rs. 10 per preference share, which consideration is in the opinion of the Board fair and reasonable to the company and to all existing shareholders of the company of a tenure of five years from the date of issue, 
• Carrying a preferential non-cumulative dividend of Rs.0/70 Cts. per preference share per financial year [the payment of the dividend could be reduced or waived off permanently in the event of profit being inadequate to support such payment in part or in full, as stipulated in the Finance Business Act No. 42 of 2011, under the definition of core capital]
• At a convertible price which shall be the average of the daily volume weighted average price of the ordinary shares as published by the Colombo Stock Exchange over the 60 trading days immediately preceding the date of issue of the preference shares, (without the requirement of a payment of an additional consideration), in to such number of fully paid ordinary shares, determined by dividing the applicable original issue price of such preference shares by the aforesaid applicable conversion price, (any fractions arising on such conversion to be ignored and to be dealt with at the discretion of the Board) which is in the opinion of the Board fair and reasonable to the company and to the existing shareholders of the company
• the convertible price, shall be adjusted at the discretion of the Board, in the event of an increase or decrease in the total number of ordinary shares in issue (post the issue of the preference shares), for any reason whatsoever, including right issues, issue of shares by capitalisation of reserves, subdivision of shares, consolidation of shares, repurchase of shares, share dividends or other change in the company’s share capital structure so as to prevent the enhancement or dilution of rights of the issued preference shares,
• the preference shares to be deemed converted, immediately upon the completion of five years from the date of issue and to be listed subsequently,
• carry a right to participate in any winding up or liquidation of the company in priority only to ordinary shares of the company (pari passu amongst the preference shareholders) in the event of winding up or liquidation as the case may be and the right to participate in a repurchase scheme affecting such preference shares and occurring during the tenure of the preference shares. 

The primary purpose of this issue is to enable the company to meet its Central Bank stipulated core capital requirement of Rs. 2.5 billion as set out in the Finance Business Act No 42 of 2011 and consequently, to make use of this opportunity to further enhance its capital base so as to be able to enhance its gold loan portfolio as well as meet other likely commercial requirements.

The Rights Issue is subject to the Colombo Stock Exchange and the Securities and Exchange Commission of Sri Lanka, approving (as appropriate) in principle, the issue and listing of the preference shares and the issue and listing of the ordinary shares post conversion of the preference shares, as aforesaid, by way of a private placement, and obtaining shareholder approval by way of a special resolution, at a general meeting.

Muthoot Finance Ltd. owns a 73% stake in Asia Asset Finance Plc and Senthilverl Holdings 6%. The company's public float is 27% held by 2,174 shareholders. 

The highest price of Asia Asset Finance share in the quarter ended 31 December 2020 was Rs. 9.70 and lowest was Rs. 7.50 before closing at Rs. 9.10. Net assets per share was Rs. 17.63 as against Rs. 17.50 as at end FY20.