Wednesday, May 2, 2012

NSB 12% buy a future investment, says TFC

The recent buy of a 12% stake of The Finance Company (TFC) by the National Savings Bank (NSB) is completely value driven and an investment to the future of both corporate entities, said TFC Chairman Preethi Jayawardena.

 The contention that the price paid for each share of TFC was premium and did not validate the company’s share value was roundly rejected by Jayawardena.

“The investment by NSB was on the future of TFC. This is an institution with a long and prestigious history. However, after the Ceylinco debacle, there were doubts cast upon the company’s future.

When I was appointed as Chairman of the company and the new Director Board took over, upon intervention of the Central Bank, TFC was in great financial difficulties. From a Rs. 1.7 billon loss-making venture, the company has witnessed a significant turnaround, making Rs. 15 million in profit during the last three quarters,” he said.

 Jayawardena, said that the value of the share of TFC previously did not reflect the company’s performance or potential.

“The share price for a TFC share was highly undervalued owing to market conditions within the country and external factors such as economic factors on a global scale. Therefore, it can be safely said that the share price did not reflect the true worth of the company,” added Jayawardena a widely-respected business leader currently functioning as the Managing Director/CEO of Chemanex PLC and also as a Non-Executive Director of CIC PLC (the holding company of Chemanex).

 The Chairman said that the transaction should not be viewed as a one-off dealing. “This is a partnership for both entities. This was not a share bought over the counter and I am sure NSB would have done its homework before consideration. The benefits that would be reaped by the deal would augur well to all stakeholders of both companies and would provide horizontal integration to both companies in their future endeavours.”

Jayawardena was optimistic about the future of the company, stating that TFC had taken all necessary steps to strengthen infrastructure in order to meet the needs emerging within the current market.

“The inclusion of a new Director, Cherille Rose – a former Vice President of global giant Citi Bank – has added to the strength of the company. We have adhered to all corporate governance principles and have taken all necessary measures to ensure that the company is run efficiently and diligently. I firmly believe that investors should look at the future of the company and this is exactly what this transaction mirrors,” he said.

 TFC Director/CEO Kamal Yatawara also expressed similar sentiments: “The company has been working with an internationally-reputed strategic consultancy firm and this will only go on to maximise value and profit creation.”

Yatawara went on to point out that TFC is necessarily value-driven with a proud heritage and history.

 “This company is the largest and most sought-after financial institution in the country.  Today the monthly intake in deposits of the company has exceeded over Rs. 1 billion, which mirrors investor and public confidence in the company.”

Commenting on intervention by the Central Bank, Yatawara noted that the intervention proved vital.

“When financial institutions in the West were falling like a pack of cards, leaving employees and investors destitute, not one registered financial institution in Sri Lanka had to close shop.”

Yatawara went on to state that the buy by NSB would enhance value to both companies to serve their stakeholders and the public at large. “NSB is a specialised banking institution and this in essence is a strategic partnership. NSB will be able to integrate horizontally and move into sectors that it could not previously due to limitations in place. It will open up new avenues for both entities and is clearly a win-win situation for both companies.”

Speaking on the transaction further Yatawara said that since TFC had been the market leader in the real estate industry, the partnership with NSB would cement its dominance and provide relief to its clientele.

“A majority of citizens in the present day market buy land on loans and this partnership will only add value to them, giving them the direct opportunity to take out loans with less hassle and adding value to what we bring as a company to the desk. TFC has witnessed an unprecedented increase of 350% bringing in Rs. 2.7 billion in real estate-related transactions in comparison to last year and the partnership will further cement our surge,” he said.

 Yatawara pointed out that the transaction would have occurred after thorough and careful analysis of the future potential of the company together with its corporate practice. The infrastructure possessed by TFC was also a major contributing factor for the investment. “TFC has the largest and widest network in our specified business and therefore it proved to be crucial in the decision,” he said.

 He went on to state that the investment by NSB was one that was long-awaited. “NSB in fact wanted to buy shares worth Rs. 200 million during the initial share issue, but circumstances were such that when the cheque was received when the issue was closed. They always had an intention to pursue a profitable venture with us,” he said.

 Yatawara said that the investment would prove to be fruitful in the near future. “As a company, despite doing one of the best turnarounds in the country’s recent corporate history, we know that we could achieve much higher goals. The investment would facilitate this drive to the future and cement our place once again as the most respected and profitable company in the country in our specified business.”

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