Asia Capital spreads its wings

Asia Capital recently sold its 53% stake in Asian Alliance Insurance and a 40% stake in Asia Siyaka, realising Rs. 2.3 billion. It now plans to forge ahead with a new portfolio of investments in films, hotels and IT. Asia Capital’s senior management outlined these plans and its forthcoming Initial Public Offering, plans to float a new hotel and its new role in the movie business in a wide-ranging interview with the Daily FT.

Asia Capital CEO Stephan Abeyesinhe, Asia Securities CEO Sabri Marikar, Asia Asset Finance Chairman Daya Muthukumarana, Asia Asset Finance CEO Rajiv Gunawardena, Asia Leisure CEO Mahinda Galagedera, Asia Digital Entertainment CEO B.S. Radha Krishnan and Asia Capital Technology Head Rajitha Basnayake shared their plans:

By Dinali Goonewardene

Q: How much did you realise from the sale of Asian Alliance Insurance? Do you plan to reinvest this in its entirety and what are your plans for investment?

Stephan Abeysinghe: We realised Rs. 2.3 b selling a 53% stake in Asian Alliance Insurance. We will be reinvesting Rs. 700 m in hotels. We have three properties in Colombo, Balapitiya and Galle areas. We will start investing in three properties from scratch in Trincomalee, Galle, a beach front property, Jaffna and Nuwara Eliya. They will take two years to build. We will have a total of six properties. We plan to take the first hotel in Balapitiya public.

Q: What is the estimated payback period for the investments?

Stephan Abeysinghe: The payback period is five to six years.

Q: You will be investing Rs. 700 m in hotel projects. Can you tell us about the concept of your hotels, its clientele, occupancy levels, the market it serves, peak occupancy periods, etc.?

Mahinda Galagedera: These are boutique properties. Fifty per cent of reservations are through the web and 50% through travel agents and the local marketing arm. We cater to business travellers and leisure travellers. We don’t have an off-peak season. With our investment in beach front properties, we will have everything including adventure tourism available under one roof, including gourmet facilities. We cater to the business traveller with Wi-Fi, TVs, vegetarian menus, etc.

Q: Can you tell us about your investment in the digital media technology company?

B.S. Radha Krishnan: We will be venturing into Hollywood, producing a film for Hollywood. We aim to make commercially-viable films, making directors understand economic viability. Our first film is the ‘Road from Elephant Pass’ or ‘Alimankada’ dubbed in Tamil and we intend marketing it overseas.

We will be entering the videos on demand market and converting 152 cinemas operating under the conventional system to digital cinema. It will help bring down costs. Conventional technology uses VSAT and a film projector. We will be investing US$ 2.5 m in set-up cost.

The principal photography for ‘A Common Man’ directed by Chandran Ratnam is complete and we have contracted Ben Kingsley and Ben Cross as supporting actors. This film is due for release before the end of this year. We will have two premieres; one in Los Angeles and the other in Sri Lanka.

Q. Asia Asset Finance plans an Initial Public Offering in October this year. How many shares will you be offering for sale and at what price? Is the listing to comply with regulatory requirements and how will you utilise the funds from the IPO?

Stephan Abeysinghe: Two hundred million shares will be issued at Rs. 2.50 to raise Rs. 540 m. We will go public by mid October. Thirty per cent will be divested from the current ownership. The proceeds will be used to expand business. We don’t have debt and there is therefore no need to retire debt. The proceeds will be used to gain higher revenue and add reach. Out of the funds raised, 10% will be used to expand the branch network and 90% for core operations. We plan to increase the number of branches by 15, setting up in the north and east.

Q: Asia Securities is looking to acquire some troubled broking firms. Do you see the need for consolidation in the stock broking industry? How do you view sentiment and the retail- foreign investor mix in the Colombo stock market at present? Do you see this mix changing?

Sabri Marikar: We feel there are too many broking firms. They entail a massive set-up cost and the recruitment of senior staff at a high level. Three to four broking firms are having trouble. We are looking to consolidate. Securities is our core business.

Foreign investment has been slow over the last six to eight months. We have seen more selling, taking profits and getting out. The blue chips have attractive valuations and we would see foreign investment at the right time. That is one reason why we have got heavily into the retail segment, opening 13 branches using two online trading platforms to get a broader market.

Q: Why did you sell out of Asian Alliance and Asia Siyaka?

Stephan Abeysinghe: We sold 40% of Asia Siyaka realising Rs. 185 m from the sale. We don’t hold anything under 50% which is not a subsidiary and this was an opportunity to divest. We had exploited all possible synergies of insurance and see more growth in the other two sectors, which are securities and credit.

Q: Can you tell us about the Regent Sri Lanka fund that has been set up to invest in Sri Lankan shares?

Stephan Abeysinghe: We have not officially launched the Regent Sri Lanka fund. It is a tracker fund which will be launched next month in partnership with a company based in Sydney, Ataraxia Capital Partners. It is a Rs. 400-500 m fund which will invest in approximately 25 stocks – fundamentally sound stocks, blue chips, banks, etc.

Q: Can you share with us some details about recent structuring or advisory work that Asia Wealth is involved in?

Rajiv Gunawardena: Asia Wealth carries out research for all our clients building a corporate finance division looking to go into advisory services and will be working out the Asia Wealth Asset IPO.

Q: Can you detail your plans for the information technology company you will be investing in?

Rajitha Basnayake: Asia Capital Technology has been repositioned focusing on capital market solutions while delivering trading and engineering solutions. It will also serve as a shared service centre for information technology services for the rest of the group. IT will be used as an edge to continue to invest in infrastructure. It will deliver finance sector solutions, hire purchase and leasing systems.

Q: Tell us about your plans for improving profitability in the year ahead?

Stephan Abeysinghe: The hotels have turned around to profitability and we predict a better performance for Asia Wealth and hope to have a good year.