Asia Asset Finance upbeat of reaping higher benefits

By Cassandra Mascarenhas

With its impending Rs. 450 million IPO, which will open on 28 November, divesting a 27.8 per cent stake of the company to the public, Asia Asset Finance Limited, a subsidiary of the Asia Capital Group, expressed its confidence at recording a net profit of over Rs. 100 million at the end of its financial year in March 2012 following a 200 per cent profit growth in its previous financial year.

Since its impressive transformation following a management change after a takeover in 2009, the company has made a name for itself as an unconventional finance company due to the uniqueness of its product offerings and services. The company has also set itself some impressive targets for the near future with plans of expanding from their current network of nine branches to 23 branches by the end of its financial year in 2013.

Asia Asset Finance Limited General Manager – Operations Roshan de Silva Gunasekera explained that the company has adapted a management style called the blue ocean strategy through which they make the competition irrelevant.

“We achieve that through internal innovation and differentiation because we don’t want to compete in the same traditional market as our competitors, thereby sacrificing profits. So we either go to non-traditional markets geographically, for example, virgin markets like Kilinochchi and Mullaitivu or we will offer the market a different product which is not directly competing with the products offered by the standard finance companies,” he said.

Their tailor made and differently structured product offerings to customers include a wide range of services which consists of microfinance, loans for women entrepreneurs, educational loans, cheque discounting and group personal loans amongst many others.

They currently boast over 20 products, both lending and deposit, which are not offered by a standard leasing or finance company because they mainly go for leasing, hire purchase and mortgaging but Asia Asset Finance goes out of its way to offer much more so that their product is structured differently to the standard one.

Gunesekera further went on to say that they follow a second strategy called 360 degree strategy through which they link customers from all over the island, adding value to their customers in the process.

“Customer loyalty and retention are one of the key areas that we focus on because the existing client will always be a better one rather than going in for new clients and advertising and such. Although we engage in sectors usually perceived by the market as risky, we have still maintained a recoveries ratio of less than 0.4 per cent which has not been achieved by any other company,” he added.

Another key differentiating factor within the organisation is their workforce; all the members of their management including the CEO are below the age of 40 which has led to greater innovation, flexibility in thinking and more creative service offerings.

In addition to this, the young management team has also been entrusted with great responsibility and decision making powers, thereby empowering them. As a result, the company boasts a staff retention rate of nearly a 100 per cent. The company currently maintains a workforce of 100 employees.

“The main differentiation we have done is in our staffing. We have a very good in-house graduate training programme and we recruit as much as possible graduates who are qualified in various areas who will add value to the customers. If I take our Kurunegala branch manager, he is an agriculture graduate and he is in a position not only to offer financial services to our customer but also advice customers on agriculture,” elucidated Gunesekera.

The organisation also maintains a flat organisational structure and their young and dynamic team enables them in management activities.

“We realised that being a small company, for us to grow, we can’t be doing the things that the traditional companies do because if we offer a standard leasing or hire purchase product in the Western Province, I’m competing directly with the banks which may not be the best thing to do because I’ll be sacrificing my profitability therefore we had to innovate,” he said. “Our company services some of the biggest corporates in the country to the farmers in rural areas which shows the range of our reach and services.”

The IPO later this month will offer 120 million shares at a reference price of Rs.2.50 each with a further 50 million shares also accepted if an option is exercised by directors. This would bring the total number of shares on offer to 170 million and total sum raised to Rs.425 million.

Of the shares on offer, five per cent is to be allocated to employees of Asia Capital PLC and its subsidiaries, 10 percent to depositors of Asia Asset Finance, and 15 per cent to shareholders of Asia Capital. A further 20 per cent will be allocated to non retail investors, 40 per cent to retail individual investors, and 10 per cent to unit trusts.

Ninety per cent of funds raised through the IPO would be invested in core operations of the firm which includes leasing, hire purchase, corporate loans, three wheel, group personal loans, consumer financing, and pawning. The remaining 10 per cent would go towards branch expansion and product development.

Pic by Daminda Harsha Perera