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Saturday, February 26, 2011

Many companies to introduce shares to CSE, rather than make public offers

By Hiran H. Senewiratne

Sri Lanka’s booming stock exchange expects around 50 new firms to be listed this year and market analysts say many of these new listings would be through an introduction of shares rather than through initial public offerings (IPOs).

The Securities and Exchange Commission (SEC) recently said around 50 IPOs are lined-up for this year, which include 35 finance companies seeking to satisfy a Central Bank regulatory requirement requiring them to go public this year.

However, Director/General Manager Ceylinco Stock Brokers, Sriyan Gurusinghe said that many companies will go for listings by introduction rather than going for IPOs, including some of the finance companies.

"The Central Bank requirement is only to be listed on the Colombo Stock Exchange (CSE), and not necessarily go for an IPO," Gurusinghe said.

According to Gurusinghe the purpose of going for an IPO is to raise funds or capital for a company. This would broaden the ownership of the company and certain entrepreneurs or individual businessmen are not in favour of this.

Securities and Exchange Commission Director General Malik Cader speaking to The Island Financial Review said it would be entirely up to the companies to decide whether or not they wanted to go for an IPO or make an introductory listing of shares.

Some of the state-owned entities lined up for IPOs next year include national carrier SriLankan Airlines, its catering unit SriLankan Catering and Litro Gas, brokers said.

According to the SEC sources the IPO boom could lift CSE’s market capitalisation to Rs. 3 trillion (US$ 30 billion) this year.

Due to the low interest rates and the strengthening of the Sri Lankan rupee against the US dollar, several individuals and companies will come in to the stock market probably after April. This would give an additional boom to the market, financial analysts said.

The Central Bank has forecast Sri Lanka’s US$ 43 billion economy will grow 8.5 percent this year and this is expected to create an active stock market in the region.

source - www.island.lk