LCB Finance looks to rapid transformation via IPO

Chairman Prof. Abeyratne Bandara

CEO and Executive Director K.G. Leelananda

Lanka Credit and Business Finance Ltd. (LCBF) is one of the newest entrants to the Non-Banking Financial Institution (NBFI) sector in Sri Lanka having commenced operations in 2018 with the acquisition of a distressed entity under the supervision of the Central Bank of Sri Lanka (CBSL). 

LCBF’s journey since inception has therefore been unconventional and involved significant business turnaround efforts over the last three years as opposed to a typical inception of an NBFI.

Lanka Credit and Business Ltd. (LCBL), the parent of LCBF, acquired City Finance Corporation in 2018 at a critical juncture when the company’s depositors were losing faith in recovering their life’s savings. LCBL’s entry provided them “a second wind” with the implementation of a time-bound and credible repayment plan approved by the CBSL. 

Despite a largely unfavourable macro environment which included sluggish growth in the overall economy, Easter attacks in 2019 and the COVID-19 pandemic, LCBF has stayed the course in pursuing its goal of turning around a stressed balance sheet whilst strengthening the capital base, expanding the loan book and resolving legacy issues inherited from the time of the acquisition. 

These efforts have culminated in LCBF receiving B+ (stable) rating by ICRA with gradual improvements in credit ratings achieved over the last three years. 26 October, being the opening day for the Initial Public Offering (IPO) of LCBF, marks an important milestone in the corporate journey of the company. The IPO is in fulfilment of the requirements stipulated by the CBSL at the time of approving the City Finance acquisition in 2018.

CEO and Executive Director K.G. Leelananda has steered LCBF to its present status ably assisted by the Board of Directors lead by Prof. Abeyratne Bandara who has been the Chairman providing overall guidance and direction to the entity. Leelananda has also assembled a team of industry veterans in revamping LCBF management strength to pursue the aggressive growth plans of the organisation. 

LCBF’s initial focus has been on uplifting the livelihoods of entrepreneurs and small businesses in the Southern Province given its inception from Galle. Nevertheless, LCBF has drawn up strategic plans and has already expanded into other provinces and aims to establish an island wide network of 38 branches to accept a broader mandate of supporting the Micro Small and Medium Enterprise (MSME) sector of Sri Lanka. 

It should be noted that LCBF currently has eight branches and is expected to launch four more branches within the current year. All branches are strategically located away from larger NBFI players focusing on the target customer segments of the company. 

LCBF’s IPO assumed greater significance in the background of this impressive turnaround journey. The IPO offers a total of 125,000,000 new shares priced at Rs. 4 each affording the public an opportunity to partake in the value created by this business turnaround. 

NDB Investment Bank, which advised LCBL at the time of its entry to the NBFI space in 2018, is acting as the Financial Advisors and Managers to the IPO. 

LCBF has ambitious plans to achieve a total asset base of Rs. 20 billion via organic and inorganic growth avenues and has secured the strength and backing of its current shareholders in becoming one of the stronger surviving players in the NBFI sector subsequent to the implementation of the Sector Consolidation Plan of the CBSL. 

This is further demonstrated by the undertaking given by LCBL to infuse a further Rs. 200 million via the IPO in the event of an under-subscription. Applications for the offer are being accepted now and the IPO will open tomorrow.