Half truths in ‘not-so-ugly truth of NSB saga ’view

Thursday, 24 May 2012 01:26 - - {{hitsCtrl.values.hits}}

I was amused to read the justification of the infamous NSB-TFC scandal written by Granville Perera of Katunayake, Letter to the Editor: Not-so-ugly truth of the NSB saga! (published yesterday). It is worthy of Dinal Wijemanne’s defence of the sordid transaction. Perera is in the league of the man who climbed the kitul tree to cut grass.

(For those don’t know the Sinhala proverb: A man was caught red-handed atop akitul palm tree obviously trying to steal the pot collecting the sap of the kitul flower. When confronted, the man said he was looking for grass to cut. When admonished that there was no grass on the tree, he said that was why he was climbing down! Even without a plausible defence, he tried to justify his action.)

The conflict of interest of TFC directors selling their shares at a hugely over-valued price to NSB through a brokerage which is owned by one of them is well documented and is already in the public domain.

But I would like to focus on Granville Perera’s attempt to bamboozle the reader with a half-truth. He says that TFC has a deposit base of over Rs. 20 billion, bigger than that of some banks. He forgets, or deliberately ignores, the fact that TFC is also a huge loss making entity. TFC reserves are a staggering negative Rs. 7,804,732,713.065. This figure is taken from TFC’s own website (http://www.thefinance.lk/investorinformation.php). TFC’s net loss for the 2010/11 financial year is another staggering Rs. 3.83 billion (rpt billion). That means, for every rupee that depositors placed with TFC, the company has lost 18 cents.

Even the market price of Rs. 28 to 30 for a TFC share is excessive considering that the net asset value of the company is negative Rs. 23.65 that is, every share is worth minus Rs. 23.65! Earnings per TFC share are even more distressing. For every share in the company, TFC lost Rs. 87.54 rupees in the last financial year. We are not taking into account the serious loss of confidence in and the negative image of TFC after it failed to meet its obligations to depositors following the Golden Key collapse. It is good to remind people that TFC is part of the Golden Key group, which was largely a ponzi scheme run by Lalith Kotelawala.

Thus, the Rs. 20.8 billion (figure from the TFC website) deposit base, which has come down from Rs. 28.5 billion in 2007 and is therefore a shrinking base, is money that TFC depositors cannot freely withdraw because the company is unable to repay. In fact, it is well known that the TFC was unable to meet its obligations to depositors and that is why the state had to step in after the collapse of Golden Key. The NSB, even if it wants a controlling interest, is only acquiring a huge liability which will eventually be passed on to Sri Lankan tax payers.

People place their trust in the NSB not for a bunch of crooks to gamble with their money and fatten their wallets.

Sunil Mendis

Colombo7