Ishara buys 30% stake in LOLC for Rs. 12.8 b in mega deal

Young business leader Ishara Nanayakkara yesterday bought a further 29.97% stake in his flagship firm LOLC for Rs. 12.8 billion in a deal described as by far the biggest individual purchase in capital market history. 

He bought the stake from LOLC’s founding joint venture partner, Orix Corporation of Japan.

The stake amounting to 142.458 million shares was done at Rs. 90 each. With yesterday’s purchase, Deputy Chairman Ishara’s control at LOLC increased to 78.88%.  The vehicle he used to buy the stake is LOLC Holdings Ltd., which is 100% owned by Ishara.

The strike price appears to be attractive. On Tuesday LOLC traded between a high of Rs. 112 and Rs. 111 before closing at the latter level, down by 90 cents.  However yesterday investors, apparently heartened by Ishara’s aggression, saw more value in LOLC as the share price shot up to Rs. 120 before closing at Rs. 118, higher by Rs. 7. LOLC’s 52-week highest is Rs. 145 and the lowest was Rs. 59.90.

Net asset per share of LOLC as at 31 December 2017 was Rs. 97.55 and at Group level it was Rs. 141 up from Rs. 76.49 and Rs. 93.61 from a year earlier and Rs. 98.89 and Rs. 123.84 as of 31 March 2017.

The LOLC deal boosted the Colombo stock market turnover to a seven-year high of Rs. 13.4 billion, the highest since 16 March2012

According to analysts, Orix’s exit is part of its global strategy, which of late has been exiting from minority holdings. Additionally, it has realised fuller value over the years after entering Sri Lanka in 1980.

Established in 1964, Orix Corporation has interests in corporate and retail and overseas financial services, automobile related services, real estate and environment and energy, aircraft and ship leasing, etc.

Though LOLC’s primary business is financial services, including micro finance and insurance, it has diversified into manufacturing and trading, leisure and entertainment, plantation and power generation among others.

LOLC has assets worth Rs. 770 billion at Group level and Rs. 103 billion at Company level. Group revenue in the first nine months of FY18 was Rs. 107.6 billion, up by 63% and pre-tax profit was Rs. 17.6 billion, up by 71% over the corresponding period of FY17.

The exit by Orix resulted in a foreign fund outflow of a net Rs. 12.7 billion, reversing the year-to-date net foreign inflow to a net Rs. 5.3 billion worth outflow. This was the highest net outflow in the last nine years for which data is available.