LOLC to consolidate finance companies, float holding company

• Says move aimed at attracting large foreign investors
• To be listed new entity LOLC Ceylon will have 45% of LOLC Finance PLC, 99% of Commercial Leasing and Finance PLC and 55.5% of LOLC Development Finance PLC
• Combined assets of three companies are worth Rs. 272 b; deposits Rs. 130 b
• Share prices of all companies gain

Conglomerate LOLC Holdings PLC is to consolidate all its finance companies into a new listed entity and will hold all the key stakes, a move the company said was to attract large foreign investors. 

LOLC said that as part of the Group’s global strategy to attract investors to the large finance companies within the Group it is creating a platform to enable potential investors to acquire a minority stake. “LOLC believes that these large-scale foreign investors have the capabilities to support our companies to grow even further and offer an even better service to our customers by introducing latest technologies, technical know-how and providing training to our employees,” LOLC said in a filing to the Colombo Stock Exchange. 

For this purpose, LOLC Holdings PLC (LOLC) has designated a fully owned subsidiary, LOLC Ceylon Holdings Ltd. (LOLC Ceylon), to operate as a platform and plans to list LOLC Ceylon in the Colombo Stock Exchange. 

Post listing of LOLC Ceylon, the shares owned by LOLC in LOLC Finance PLC (LOFC) amounting to 44.79%, shares owned in Commercial Leasing and Finance PLC (CLC) amounting to 98.92%, and the shares owned in LOLC Development Finance PLC (NIFL) amounting to 55.55%, are to be transferred to LOLC Ceylon. 

As this is an internal group restructuring, the transaction will be executed at the prevailing market prices at the date of the transfer, as an off-the-floor transaction. 

Market responded to the move positively. CLC share price gained by 24% or Rs. 1.10 to Rs. 5.60, LOFC moved up 16% or 80 cents to Rs. 5.70. LOLC Development Finance saw its share price gain by 14% or Rs. 6.70 to Rs. 55.10. Parent LOLC moved up 3.5% or Rs. 5.75 to Rs. 165.75. 

LOLC said it has obtained approval in principle for the transfers from the Securities and Exchange Commission of Sri Lanka. Further, the Department of Supervision of Non-Bank Financial Institutions of Central Bank of Sri Lanka has confirmed it has no objection on the proposed transfer.

LOLC Finance as at 30 September 2020, had assets worth Rs. 179.7 billion with lending of Rs. 126 billion. Liabilities were Rs. 148 billion. Deposits amounted to Rs. 97.5 billion, the largest within NBFI sector. Equity attributable to shareholders was Rs. 31.5 billion. Net asset per share was Rs. 6.01.

In the first half of FY21 LOLC Finance made a net interest income of Rs. 10.6 billion and a pre-tax profit of Rs. 250.5 billion.

Commercial Leasing and Finance as at 30 September 2020 had assets worth Rs. 73 billion and its lending portfolio was Rs. 54 billion. Liabilities amounted to Rs. 53.7 billion. Deposits were worth Rs. 29 billion. Equity attributable to shareholders was Rs. 19 billion and Net Asset per share was Rs. 3.01

In the first half of FY21 it posted a net interest income of Rs. 3.6 billion and a pre-tax profit of Rs. 249 million.

LOLC Development Finance as at 30 September 2020 had assets worth Rs. 18.8 billion and lending of Rs. 16 billion. Liabilities were Rs. 16.1 billion and deposits were Rs. 3 billion. Equity attributable to shareholders was Rs. 2.7 billion and Net asset per share was Rs. 11.34.

In the first half of FY21 it earned net interest income Rs. 1.3 billion and achieved a pre-tax profit Rs. 43 million. In FY20 it recorded a profit after tax of Rs. 109 million compared to a loss of Rs. 153 million. 

Apart from these companies, LOLC’s financial sector comprises of a diversified portfolio of investments starting with its main businesses in Sri Lanka, and covers Asia including Cambodia, Myanmar, Indonesia, Philippines and Pakistan. 

The LOLC Group’s gross income in FY20 was Rs. 130 billion, and a significant contribution came from the financial services sector for the increase in interest income representing 80% of the Group’s top line. The growth in interest income from financial services after charging interest expenses recorded a net interest of Rs. 55 billion in FY20.

Among the top contributors to the Group PAT was the financial service sector contributing Rs. 24.8 billion, representing 91% to the overall profitability of the Group, inclusive of contribution from PRASAC, which accounted for Rs. 19 billion.

The total asset base of the Group increased to Rs. 1.3 trillion and the lending portfolio was Rs. 331 billion in FY20.