Commercial Leasing buoyed by BRAC Lanka acquisition
Tuesday, 23 September 2014 01:22
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Commercial Leasing and Finance Plc (CLC) revealed it was extremely pleased with its acquisition of BRAC Lanka Finance (BLFC).
“We are excited with the acquisition of the controlling stake in BLFC, in which we have been having an associate stake through LOLC’s subsidiary LOLC Micro Investments Ltd. With our full commitment to CBSL’s financial sector consolidation strategy, it is our intention to capitalise on BLFC’s business fit with our group. We successfully negotiated with our partners in BLFC, to acquire the controlling stake of BLFC,” CLC’s Chairman and LOLC’s Deputy Chairman Ishara Nanayakkara said.
“BLFC has emerged as a bigger company with a significant micro finance portfolio and a strong distribution network in the micro finance sector, which was long ago established by the BRAC NGO. We believe that the alignment of the BRAC micro finance distribution and CLC’s unique distributor network will further strengthen CLC as one of the largest finance companies in the country,” Nanayakkara added while explaining the strategy behind the recent acquisition,
Analysts believe that with the acquisition of BLFC, CLC’s financial performance and margins will show robust growth in the coming years. The addition of the BLFC customer base will also boost the cross sell opportunities for the LOLC Group.
Recently CLC acquired the controlling stake of 56.3% in BLFC for Rs. 578 million or Rs. 9.70 per share.
Completing the transaction with BLFC’s previous owner, CLC bought the balance held by BRAC, consolidating its position at 59.33%. With this acquisition, LOLC Group owns 94.35% of BLFC considering the associate stake in BLFC of 35.02% held by LOLC Micro Investments Ltd.
With the acquisition of 59.33% of BLFC, CLC will be making a mandatory offer to the rest of the shareholders of BLFC to acquire the balance shareholding. CLC is planning on merging BLFC’s full business operations in the near future in line with the CBSL direction on financial sector consolidation. CLC’s total investment in BLFC is expected to be Rs. 1.025 billion.
Promoting CBSL’s strategy of the financial sector consolidation, CLC acquired BLFC with the long-term vision to grow the micro finance business portfolio. CLC sees strong potential and a good fit, in acquiring BLFC in its pursuit to develop the micro finance business along with its SME business.
CLC is one of the largest registered finance companies in Sri Lanka with a 26-year history of strength and stability. In 2008, LOLC bought over CLC and since then the company has flourished into a much larger specialised leasing company and later obtained the finance company license from the Central Bank of Sri Lanka (CBSL) in the latter part of 2011.
As a registered finance company, CLC has raised public deposits exceeding Rs. 9.1 billion within a very short period, diversifying its borrowing portfolio. CLC also boasts of a strong lending book of Rs. 29.1 billion consisting of leases, hire purchase and loans. CLC has a strong presence in the factoring business both in the western province and in the rural sector.
CLC’s lending book grew 4.2 times over with profit growth of 185% over the last few years. LOLC’s strong vision for CLC and its business model has contributed to CLC’s consistent performance and the strong financial position. LOLC holds an equity stake of 99% in CLC.
CLC operates across the country through a broad branch network and has a strong introducer business model reaching the lower SME and micro customer segments. CLC boasts of a low cost distribution network which reaches both these segments.
BLFC was previously known as Nanda Investments PLC., and was acquired by BRAC Lanka Investments, part of BRAC which is one of the largest micro lending NGOs in Sri Lanka, together with LOLC in 2013. BRAC Lanka Guarantee is a subsidiary of BRAC International Holdings BV Netherlands, one of the largest NGOs in the world.
Subsequent to the investment in NIFL, the company’s name was changed to BRAC Lanka Finance Plc which acquired the micro finance portfolio of BRAC amounting to Rs 1.3 billion. BLFC has a large micro finance client portfolio, numbering 68,000 and has an island-wide branch and service center network of 82. CLC takes over the entire staff of BLFC numbering 610 and will focus on streamlining its business operations with CLC taking the first step towards establishing a dedicated micro finance business channel.
