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Tuesday, 5 February 2013 00:04 - - {{hitsCtrl.values.hits}}
Hatton National Bank (HNB) has sold its 20% stake in Delma Exchange, UAE, an exchange house which was making losses.
Without disclosing the consideration price, HNB in a filing to the CSE said 50% of the sale proceeds had already been received and the balance would be received on deferred terms as per the Sale and Purchase Agreement entered into with the buyer.
In HNB’s books, the cost of investment in Delma is stated at Rs. 83.6 million. Despite the sale and termination of the management agreement, HNB said it would be assisting Delma with its management through a Transitional Services Agreement.
Delma, set up in 2009, operates from five outlets located in close proximity to industrial zones and strategic city centre locations. HNB’s deal with Delma was part of a strategy to utilise exchange houses in Oman and UAE to garner a greater share of booming inward worker remittance business.
It facilitates remittances to Sri Lanka, India, Pakistan, Bangladesh, Nepal, Malaysia, and the Philippines. Access to other countries is through an agency from Western Union.
In 2011 Delma Exchange posted a commendable performance in terms of transaction volume. However, the extremely high costs of operation – which is characteristic of the local market context – continued to pose pressure on the break-even targets, necessitating the operations’ break-even targets to be re-evaluated, according to HNB’s 2011 Annual Report.
HNB expressed hope of breakeven during the latter part of 2012.
Loss in 2011 was stated at Rs. 98 million, up from Rs. 79 million in the previous year. Revenue had increased from Rs. 17.6 million to Rs. 50 million in 2011. Assets amounted to Rs. 272 million, down from Rs. 303 million, whilst liabilities were Rs. 64 million, up from Rs. 5.6 million.
The sell-out from Delma comes after HNB in October 2010 ceased the commercial operation of Commercial Interlink Services Inc (o/a of Delma Exchange Canada), as directed by the Director Bank Supervision of the Central Bank of Sri Lanka.
HNB made full provision of Rs. 10.063 million against the investment and Rs. 18.885 million against the receivable from the subsidiary during 2010, while a further provision of Rs. 4.767 million was made against the receivable from the subsidiary in 2011.
