MBSL supports Alliance Finance to raise Rs. 1 b through debenture issue

Alliance Finance Company, incorporated in 1956 raised a sum of Rs. one billon through its Debenture Issue for the purpose of increasing the Tier II capital of the company in order to enhance its capital adequacy ratio and single borrower Limit, to expand the branch network, strengthen the company’s liquidity position and minimise the risk and gap exposure in the company’s assets/liabilities portfolios. The debenture issue was opened in June 2012.

The company provides financial solutions in the areas of hire purchase, leasing, term loans, operating leases, vehicle hiring, gold loans, consumer credit, fixed deposits, financing for consumer durables, collaboration finance, Import finance, and other related financial services.

During the year 2012 the company had optimised the country’s economic benefits and it helped to increase the total assets value up to Rs. 14.8 billion (as at 30 September 2012 un-audited) and it was a growth of 34% compared to the year 2011’s Value of Rs. 9.8 billion.

The Company announced un-audited earnings results for the six months ended 30 September 2012. For the six months ended, the company reported net interest income of Rs. 634 million against Rs. 457 million a year ago. Operating income was Rs. 288 million against Rs. 226 million a year ago. Profit before taxation was Rs. 284 million against Rs. 212 million a year ago. Net profit was Rs. 254 million against Rs. 186 million a year ago.

Managers and registrars to the issue was the corporate advisory and capital markets division of Merchant Bank of Sri Lanka, which is the pioneer investment/merchant bank in Sri Lanka and was quoted on the Colombo Stock Exchange in 1991.

The Bank’s largest shareholder is the Bank of Ceylon which holds a strategic stake of 72% and in 2005 entered into a strategic alliance with SBI Capital Markets, which is the largest investment Bank in India.

The issue came with an option to increase up to Rs. one billion (LKR 1,000,000,000) in the event of an over subscription of initial Rs. 500 million (LKR 500,000,000) by Issuing unsecured subordinated redeemable debentures.

Each had a face value of Rs. 100, which provided an opportunity to the investors, to invest their money in fixed and floating rate debentures for three to five year maturity period, to get an attractive rate of over 20% per annum.

The contribution to the over subscription provided mainly by institutional investors constituting over 53%, others including high net worth Investors comprise 29% and retailers contributed around 18%.

 Most of the investors are invested in type A around 73%, this fully subscribed debenture issue reveals investor confidence in the company.