Sarvodaya-linked DDFC to buy George Steuart Finance for Rs. 500 m
Tuesday, 22 July 2014 00:49
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Social entrepreneur A.T. Ariyaratne’s Sarvodaya-linked Deshodaya Development Finance Ltd. (DDFC) is to buy George Steuart Finance Ltd., of Dilith Jayaweera fame, for Rs. 500 million.
The deal is subject to regulatory approval and is under the Government-promoted financial sector consolidation drive.
In a filing to the CSE yesterday, George Steuart Finance Plc (GSF) said a MOU has been signed with DDFC and George Steuart and Company Ltd. and Capital Trust Holding Ltd. to acquire majority shares of GSF for Rs. 500 million. George Steuart has a 51% stake and Capital Trust holds 25%. The rest is held by individual shareholders/investors and the public float is 24%.
As per the proposed transaction price, the 76% stake or 17 million shares works out to Rs. 29.40 per share. Net asset per share of GSF as at 31 March 2014 was Rs. 14.61. Yesterday GS Finance traded at a high of Rs. 50.40 before closing at Rs. 45.90, down by Rs. 1.80. In April the original owner Divasa Equity sold a 51% stake in GS Finance to related party George Steuart and Co Ltd., at Rs. 28.80 per share.
DDFC has a much larger business than GSF though the latter was incorporated much earlier. DDFC is a leading micro finance provider in Sri Lanka and intends to expand its outreach and diversify its existing product portfolio by amalgamating the businesses whilst keeping in line with the asset and capital enhancement requirements of the Financial Sector Master Plan by Central Bank.
DDFC is unlike any other conventional finance company. It has evolved over a period of 55 years, when the Sarvodaya Shramadana Movement was formed by its visionary founder/President, Dr. A.T. Ariyaratne. Incorporated in January 2010 DDFC was licensed by Central Bank under the Finance Business Act No. 42 of 2011 to carry on Finance Business on 19 December 2012.
DDFC’s parent organisation, Lanka Jathika Sarvodaya Shramadana Sangamaya (LJSSS), was formed with the intention of helping the underserved rural communities in Sri Lanka.
Its Board comprises Dr. Vinya Ariyaratne (Chairman ), Channa De Silva (Senior Director), Shakila Wijewardena, K.L. Gunawardena, Shevon Gooneratne, Dr. Richard William Arnold Vokes (former ADB Country Director in Sri Lanka), Dr. Indrajit Coomaraswamy and Eastman Narangoda (former CEO of NSB) who is also incidentally the Chairman of GS Finance.
As at 31 March 2013, the unlisted DDFC had a core capital of Rs. 587 million. Its loan portfolio was Rs. 3.3 billion and net loans and receivables amounted to Rs. 2.58 billion. With over 30 branches its deposit base was Rs. 2.77 billion and after tax profit amounted to Rs. 31 million, up by 11% over FY12.
As at 31 March 2014, George Steuart Finance had Rs. 329 million in shareholders’ funds including Rs. 90.6 million in retained earnings and Rs. 225 million in stated capital.
Customer deposits amounted to Rs. 1.06 billion, up from Rs. 699.6 million a year earlier. Total liabilities were Rs. 1.17 billion, up from Rs. 808.5 million. Assets were worth Rs. 1.5 billion, as against Rs. 1.1 billion on 31 March 2013. Loans and advances were Rs. 730 million, up from Rs. 397 million whilst lease rentals were Rs. 309 million, down from Rs. 425 million. The company also had Rs. 243 million in placements with banks and other financial institutions, in comparison to Rs. 115 million a year earlier.
George Stuart Finance ended FY14 with a pre-tax profit of Rs. 5.9 million, lower compared with Rs. 12 million posted in the previous year. Net profit for the year was Rs. 6.6 million as against Rs. 3.6 million in FY13 which involved a higher provision of Rs. 8.4 million for income tax.
Interest income had grown from Rs. 216 million in FY13 to Rs. 280 million and net operating income was Rs. 133.5 million, higher in comparison to Rs. 117.5 million in FY13.
