Singer Finance to excite investors with its IPO

By Sunimalee Dias

Singer Finance Ltd., yesterday expressed confidence that its Rs. 400 million IPO will excite the investing public given the rebound in the stock market as well as the Company’s own future prospects.

“An IPO leads to excitement among the investing public as now we talk of trillions and not of billions in capital formation,” Singer Sri Lanka and Singer Finance Chairman Hemaka Amarasuriya told journalists yesterday at a briefing on the IPO. Singer Finance will offer 26,666,667 ordinary shares at Rs. 15 each via the IPO officially opening of which is 15 December whilst the public can begin subscribing from today.

The offered shares amount to 25% stake of the Company whilst a 10% allocation is being made to Singer Group employees.

 Singer Finance will use proceeds from the IPO to part finance its loan disbursements through financial products such as leasing, hire purchase and consumer loans.

It is estimated that the funding requirement for the disbursements would amount to approximately Rs.1-1.2 billion. The balance funding requirement for disbursements would be financed through rental collections, public deposit and borrowings mainly from financial institutions.

Further, Singer Finance intends to strengthen its identity by having a broader scale of public ownership in the Ordinary Shares of the company, enabling it to boost its profile and image.

Singer Finance has widened  its reach with 6 branches nationwide, in addition to its  Head Office business unit located at 331, Dr. Colvin R. de Silva Mawatha, Colombo 2 (Union Place), as well as 6 customer service centers. The Company’s branch and customer service network caters to  the Western, North Central, Wayamba, Central, Southern and Uva provinces, with main branches in Kurunegala, Anuradhapura, Wennappuwa, Wattala, Kandy, and Matara, with customer service centres in Thambuttegama, Medawachchiya, Nikaweratiya, Dambulla, Mahiyangana and Galle.

The company’s expansion plan involves increasing its current network to a total of 20 by 2015. This planned expansion has already been initiated with the opening of a branch in Anuradhapura and aims to open another service centre in Vavuniya in the current Financial Year and a branch in Jaffna next year in order to capture the growth potential of the Northern Province.

Amarasuriya pointed out that once the excitement dies down the company would have to run “very efficiently and provide the adequate return to shareholders.”

Commenting on the types of shareholders he hoped that many small investors would come in as most of the big boys have their share.

Singer last held an IPO in 1990 with 1 million shares and is currently the sixth largest refrigerator manufacturer in South Asia.

Singer Finance is currently in its seventh year with a large outreach and distribution system management and above the industry credit management.

Singer Finance’s Gross Non-Performing Loan (NPL) ratio stood at 1.9% as at 31August, 2010, which is significantly below that of the other RFCs in the sector.

Compared with an industry average NPL ratio of 11.7% as at 30 June, 2010, Singer Finance’s ratio of 2.3% as at 30 June, 2010 is outstanding.

The company has already increased its lending portfolio to Rs 3 billion as at 31 March 2010 since its incorporation in 2004.

The Company’s low NPL ratio, which is a reflection of its high asset quality, has been achieved through prudent marketing, credit and finance management practices and the guidance of its  parent company, Singer (Sri Lanka) Plc.

For example, even though regulatory policy stipulates 50% provisioning for loan defaults over six months and 100% provisioning at 12 months, Singer Finance is far more stringent, with 50% provisioning for defaults over four months and 100% provisioning at the end of six months in the case of leasing and hire purchase facilities.

For consumer loans, the Company makes a 50% provision for defaults over two months while 100% provisioning takes place at the end of four months. By adhering to these higher self-imposed standards, Singer Finance has been able to maintain a healthy loan loss coverage ratio and expedite the recovery process.

As a Registered Finance Company fully owned by Singer (Sri Lanka) Plc, Singer Finance provides an extensive range of financial services to a wide variety of Sri Lankans. Standard services such as vehicle hire purchase and leasing and the acceptance of fixed deposits are bolstered by a number of innovative products, including agro-equipment financing as well as credit facilities for products manufactured by Singer.

Much like its parent company, Singer Finance is renowned for its unrivalled service standards, such as the industry’s best online, real-time repayment channels, which allow customers to make their leasing, hire purchase and loan installment payments at any Singer Finance branch or any one of over 370 Singer Plus, Sisil World, Singer Homes, and Singer Mega showrooms island-wide.

As customers have embraced Singer Finance’s core products, the Company’s interest income and net interest income have soared, with a compound annual growth rate of 75.6% and 62.8% respectively. These aggressive gains have been driven by a rapid expansion of the Company’s share of the leasing and hire purchase market, as well as the successful launch of consumer financing for Singer (Sri Lanka) customers in 2009. Singer Finance has also recorded a significant improvement of 19% in its net interest margin.

In the future the company’s prospects are to obtain a healthy capital adequacy ratio of 16.10% as at 31August, 2010 attesting to its financial stability in terms of capitalisation.