Free funds feast

Funds earmarked via Rights Issues so far top Rs. 33 b; Higher than combined value raised during past 3 years

Post-war rebound and optimism leading to buoyant equities market has lured more companies to go to shareholders to raise cash, with this year tipped to be a record.

So far this year a staggering Rs. 33.2 billion has been or is being raised via 19 Rights Issues. This figure has surpassed the amount of funds raised via Rights Issues in the past three years combined. Funds raised via Rights Issues are considered zero cost capital.

With six more months left for the year, analysts expect 2011 to raise a record high figure. The previous highest was Rs. 44.6 billion via 21 issues raised in 2007.

The combined value raised between 2008 and 2010 is Rs. 32.1 billion, whilst by the end of the first half of this year, the figure is Rs. 33.25 billion.

Of that figure already nearly Rs. 13 billion has been raised whilst four more issues recently announced aim to raise Rs. 20.3 billion. In the on-going category of Rights Issues is HNB’s Rs. 14.3 billion, the biggest announced so far this year, whilst of the completed list is Rs. 2.68 billion raised by Lankem Developments.

CT Holdings raised Rs. 2.6 billion, of which Rs. 2 billion was a private placement of shares to foreign investors.

If the 2010 figure of Rs. 24.3 billion is combined with Rs. 33.2 billion so far, then corporates in post-war Sri Lanka have raised a mammoth Rs. 57.5 billion.

Analysts linked this bullish view to the end of war resurgence in the economy and equities market in tandem with business and investor confidence.

Most of the funds raised via Rights have been to finance expansion as well as acquisitions, whilst some have boosted capital in line with regulatory requirements.

The fact that such a high value of shareholders’ funds has been tapped could be one reason why investor liquidity has been stretched. If the estimated Rs. 15 billion raised via private placements in the past 12 months is included, the extent of liquidity that has been sapped by the market is significant.
Via 10 IPOs companies last year raised Rs. 4.3 billion, whilst so far this year the figure has been surpassed with Rs. 4.6 billion raised, including that of Expolanka Holdings’ just concluded Rs. 2.4 billion issue.

This year’s issues were HVA Foods raising Rs. 319 million via its IPO, which was oversubscribed by 234 times with applications worth Rs. 7.4 billion received. Free Lanka Capital Holdings raising Rs. 1.5 billion, whilst its IPO was oversubscribed by 46 times with applications worth Rs. 69 billion received.

Union Bank raised Rs. 375 million via its record-breaking IPO which was oversubscribed by 350 times with applications worth Rs. 131 billion received. Expolanka Holdings’ Rs. 2.4 billion IPO, which closed last week with five times oversubscription, raised applications worth Rs. 12 billion. The relatively lower oversubscription rate was due to Expolanka IPO being the first under the new regime where limits were placed on banks supporting bank guarantees.

Rights Issues so far in 2011 In Rupees Millions

■Amana 01 for 01 at Rs. 1.50 per share    Rs. 750
■East West Properties 03 for 01 at Rs. 10 per share    Rs. 1,036
■HNB Assurance 01 for 07 at Rs. 62.50 per share    Rs. 390
■Lankem Developments15 for 01 at Rs. 25 per share     Rs. 2,587
■Nation Lanka Finance 03 for 02 at Rs. 5 per share    Rs. 300
■People’s Leasing Finance 01 for 02 at Rs. 25 per share    Rs. 568
■Guardian Capital 75 for 02 at Rs. 20 per share    Rs. 503
■Dunamis Capital 01 for 04 at Rs. 10 per share     Rs. 246
■Marawila Resorts 01 for 04 at Rs. 10 per share    Rs. 245
■Browns Beach 7 for 2 at Rs. 65 per share    Rs. 2,184
■People’s Merchant Bank 01 for 02 at Rs. 20 per share    Rs. 250
■Elpitiya Plantations 01 for 02 at Rs. 30 per share    Rs. 374
■Coco Lanka++    Rs. 360
■Serendib Hotels 01 for 04 Voting Rs. 24/50 Non-Voting Rs. 18/25    Rs. 501
■CT Holdings** 01 for 55 at Rs. 210  per share                                          Rs. 2,600
++05 ordinary voting shares for every 07 at Rs. 35 each and 01 non-voting share for 07 at Rs, 25 each
** Includes Rs. 650.4 million via Rights and Rs. 2 billion via private placements

On-going

■Seylan Bank 01 for 03 Voting Rs. 75 Non-Voting Rs. 35    Rs. 4,690
■Seylan Developments 01 for 01 at Rs. 11 per share    Rs. 814
■HNB 01 for 05 Voting Rs: 219/50 Non-Voting Rs: 119/50    Rs. 14,300
■Ceylon Cold Stores 01 for 10 at Rs. 300 per share    Rs. 648
source - www.ft.lk