Sri Lanka cancels an unethical deal of Fake Stock Market Bulls

Sri Lanka’s top citizen appointed by the people for the rule of the island had cancelled the controversial National Savings Bank’s (NSB) deal pioneered by government appointed NSB Chairman Pradeep Kariyawasam that involved in buying a 13.02% stake of former Ceylinco owned The Finance Company, a deal pioneered by former First Capital Money Broker Ajith Devasurendra’s Taprobane Securities lead by Dinal Wijemanne,  top Sri Lankan’ Secretariat sources revealed CSE Leaks.

Accordingly a statement by the Top Sri Lankan’s Office had said the deal had been cancelled in a release at 8 p.m. to public.

Sri Lanka's state owned public deposit rich National Savings Bank bought a 13.02% stake of former Ceylinco owned oldest finance golden house of the island The Finance Company PLC (TFC) on 27 April 2012. After the transaction a filing by Sri Lanka's former Money Broker and Bond marketer Ajith Devasurendra lead Taprobane Securities said.

National Savings Bank had bought 7,863,362 ordinary voting shares of TFC at an average price of Rs.49.74 per share. TFC was the largest contributor to the day's turnover with Rs.394.09 million and a total of 7,982,705 shares traded via 58 trades. Several crossings were done whilst TFC stocks changed hands in parcels of 2,904,983  and 4,237,400 shares at Rs.50 per share and 701,761 shares at Rs.45 per share whilst the sellers were believed to be Taprobane Securities CEO Dinal Wijemanne, Raynnor Silva and former Chairman of failed Tea Company Fern Tea Nirmala Anura Fernando who sold 50,000 shares at Rs.45 per share.

Market Analysts said that after the deal NSB directors had been compelled to cancel the payment of the transaction cost that amounted to over Rs.390 million with the instructions of the Top Sri Lankan who had later scolded the NSB Chairman for carrying out the transaction.

Not knowing the circumstances Sampath Bank PLC the Central Depository System (CDS) settlement custodian of Taprobane Securities had then paid the total sum to main sellers including Dinal Wijemmane and others.

Since NSB had not paid to the transaction after losing the payment of over Rs.390 million Sampath Bank had then cancelled settlement for other share transactions that took place after 27^th April behalf of its other brokering clients which Sampath Bank acts as the settlement custodian, according to analysts.

Meanwhile it is learnt from inside sources that shares that were sold by Dinal Wijemanne were actually owned by Ajith Davasurendra and Nirmala Anura Fernando whilst on 3 May 2012 The Finance Company PLC (TFC) in a filling to Colombo Bourse said that company wish to inform Dinal G. Wijemanne has resigned from the board of directors of The Finance Company PLC (TFC) with effect from 2 May 2012.

However the company added that Dinal Wijemanne has been again appointed as an Alternate Director to Nirmala Anura Fernando - Independent Non Executive Director of The Finance Company PLC with effect from 2 May 2012.

However TFC on Wednesday issued a statement to Sri Lanka’s Pink paper writer defending NSB’s buy.

Pink Paper quoted that analysts said that it was NSB’s prerogative to clarify or deny allegations levelled by UNP MP Dr. Harsha De Silva over the investment of Rs. 400 million to buy a 13% stake amounting to nearly eight million shares at Rs. 50 each, when the TFC stock was trading around Rs. 30.

Sri Lanka’s Pink Paper said quoting analysts that “If the TFC is making a statement and in the process divulging various price-sensitive information, then such a move may have had the TFC Board sanction. In that context then the Board as well as the director who sold can run the risk of insider dealing,” analysts opined. Among major sellers last Friday were shareholder Director Dinal Wijemanne, who incidentally is also the CEO of Taprobane Securities, the broker picked by NSB for the purchase.

According to Pink Paper NSB’s buying into TFC stirred up a controversy due to multiple reasons. One is the alleged risk of public savings when NSB makes such investments into a company which has a negative net worth of Rs. 23 per share and is saddled with Rs. 9 billion retained losses.

Though the Rs. 50 is being perceived as expensive, sellers said the 13% stake had been originally bought in September 29011 at Rs. 48 per share, suggesting that NSB paid only Rs. 2 extra.

However, others pointed out that when there were thousands of those who were stuck with shares unable to sell at lower prices after having bought last year at higher level, because of the “Arranged Deal,” sellers of TFC shares indeed were the most fortunate couple in the market.

On the day the deal went through, a few others who had relatively large blocks offered to sell, however the NSB broker had declined to buy. Analysts said it was important for NSB to collect quantities from the market rather than buying from a favoured few. Nevertheless, NSB did mop up 98.5% of the 7.982 million shares of TFC traded on Friday, whilst the major sellers accounted for 89% or 7.1 million shares comprising 2.9 million each (Dinal and Rayynor), 669,700 (Nandadeva Perera) and 667,700 (Yogendra Perera).

In the Pink Paper in a statement, the UNP’s MP and its Chief Spokesman on economic matters, Dr. Harsha De Silva had said: “We note with serious concern the purchase of close to eight million shares of TFC by the NSB at 65 per cent above its current market price. What logic was employed to pay Rs. 49.75 for shares of this high risk and loss-making financial institution when it was last traded at the Colombo Stock Exchange for only Rs. 30 is more than a puzzle.”

“Perhaps one could argue that it is the business of the board and management of any institution to pay whatever price it feels is right for anything they purchase. But NSB is not, by any stretch of the imagination, just another institution. It is absolutely the only bank whose deposits are fully guaranteed by the Government of Sri Lanka as expressed explicitly in the statute governing the bank: NSB Act No. 30 of 1971,” the UNP MP had said.

“This necessarily means that NSB must maintain a risk-averse investment profile and transactions like the one just concluded are not what it should be engaging in,” Dr.De Silva had said.

In the Pink Paper Dr. De Silva had alleged that the husband of the Chief Justice of Sri Lanka, Pradeep Kariyawasam, who continues to enjoy power and position as the Chairman of the NSB among several other plum postings offered by the Government, was a glaring example of conflict of interest.

 “A number of colourful personalities including Anura Fernando whose name has been linked to the now-abandoned Central Bank investigation on the Gold Quest pyramid scam and a former Director of Capital Reach Leasing, a company in which Ajith Nivard Cabraal had a significant interest, also sit on its board,” alleged the statement by UNP MP.

Await Updates

Questionable New Plan of CSE?

CSE Leaks exclusively learn from market sources that Colombo Stock Exchange’s (CSE) officials had consulted a global management consultant firm; McKinsey & Company, Inc. branch office in India to provide a better plan to the next development phase of Sri Lanka’s only capital market.

“CSE consulted McKinsey & Company, Inc. two months ago and so far nothing has happened and it was recommended by the CSE Chairman and its Chief Executive Officer” a top source said to CSE Leaks.

It is also learnt that so far McKinsey & Company had not been able to get an official appointment from Sri Lanka’s top treasury secretariat of the island nation to discuss the development plan for the capital market of Sri Lanka.

Meanwhile it is learnt from market sources that McKinsey & Company had been interviewing top Board of Directors of CSE, Stock Brokers, Unit Trusts and largest investors for nearly month since they started to develop a plan for the growth of CSE.

McKinsey & Company in India is established in Gurgaon in Haryana (close to New Delhi) and Mumbai whilst Gurgaon office is housed at Plot No. 4 Echelon Institutional Area, Sector 32 Gurgaon 122001, Haryana, India having phone numbers +91 (124) 661 1000 and fax number +91 (124) 661 1400.

The McKinsey Knowledge Center is located in Gurgaon and is the largest hub of knowledge professionals within McKinsey according to reports. McKinsey is said to be an advisor and counselor to many of the most influential businesses and institutions in the world and serve more than 80 percent of Fortune magazine’s list of the Most Admired Companies.

As a global management consulting firm that focuses on solving issues of concern to senior management; McKinsey serves as an adviser to many governments and institutions too. It is recognized as one of the most prestigious firms in the consulting industry and has been a top employer for new MBA graduates since 1996 globally.

Sri Lanka Market Follower Reveals Watch Dog’s ‘Goni Billa’ Price Band Theory?

By CSE Leaks Professor

The so called unexplained ‘Goni Billa’ Formulae or the 10% Price Band Theory implemented by the Buckle Tight Watch Dogs of Sri Lanka’s Capital Market was revealed to CSE Leaks by a leading market follower in the country.

“According to our studies if a company has more than 30% of Public Float, that share will never get caught to ‘Goni Billa’ Price Band” said the well versed market analyst to CSE Leaks.

“That is why REEF.N was never caught with Price Band. I guarantee similarly that if Touchwood (TOUCH) share reach Rs.500 within a day it will never get caught to ‘Goni Billa’ because there is no major shareholder for Touchwood. It is 100% guaranteed Touchwood will not get caught to 10% Price Band” he concluded.

EPF buys shares of Vallibel One to the tune of Rs.200 million?

From the news coming out of latest private placement of Vallibel One which offered 160 million shares at Rs.25 on January 17, sources from Colombo Stock Exchange says that island nation’s largest pension fund Employees Provident Fund (EPF) had recently applied for shares of Vallibel One for the tune of approximately Rs.200 million.

Island nation’s economic twist booster and financial planner who is preparing the ‘Miracle of Asia- Sri Lanka’ to face firmly for ‘Future Shocks’, Central Banker Ajith Nivard Cabraal leaded board manages Sri Lanka’s workers savings fund, EPF which has moneys exceeding Rs.855 billion according to reports. EPF had recently increased its stakes in country's private banks and hotels such as HNB, Galadari and Insurance companies.

Meanwhile sources close to Vallibel One issue told CSE Leaks that the private placement had already been oversubscribed and that it will come with the IPO on March 2011.

Vallibel One Limited is a diversified holding company incorporated on 09th June 2010. Prior to the proposed private placement and initial public offering, 100% of the shares in issue are held by the business tycoon Dhammika Perera and companies controlled by him.

Through its subsidiary companies Vallibel One has made strategic investments in financial services, manufacturing and leisure industry.

Vallibel One has 51% stake of LB Finance (LFIN) PLC and strategic investment of 15% in Sampath Bank PLC (SAMP) with another 51% stake of Royal Ceramic PLC (RCL).

Company is raising funds to finance an equity investment of Rs.3 billion in a new hotel project developed under its full owned subsidiary Greener Water Limited. The hotel will target the high end of the tourist segment and will be positioned as a five star hotel. At commencement, gross Average Room Rate will be US $ 180 and will increase up to US $ 220 by the 5th year of operation.

Greener Water Ltd has already invested Rs.266.73 million in a 14 acre land located in Kochichikade, Negombo, Sri Lanka. The company intends to build a 382 room, luxurious five star hotel designed by WATG of Singapore, one of the world’s leading design consultants for the hospitality, leisure and entertainment industry. The construction of the hotel is estimated to take two years and commercial operations are planned to commence by end of 2013.

The total estimated cost of the hotel project is Rs.5 billion and the hotel will be developed as a BOI approved investment which will qualify for 8 years tax holiday, and a concessionary tax rate of 15% thereafter.

Shangri La's Seven Star hotel Insurance Deal signed up by Ceylinco Insurance?

Shangri-La development site in the heart of Colombo,Sri Lanka

According to top end exclusive sources from Sri Lanka’s leading Insurance giant, Ceylinco Insurance PLC; it had signed up for insurance deal with the upcoming US $ 500 million investment on a Sri Lanka's first ever Seven Star hotel, that is going to be owned by world famous hotelier Hong Kong-based Shangri-La group.

This was confirmed to CSE Leaks; by an exclusive high profile Director who holds Director Posts in a number of Ceylinco companies, “Yes Partly” said (answering to CSE Leaks' question on whether Ceylinco Insurance has got the Shangri La Hotel Insurance deal) the top Director type who is also one of the Deputy Chairmen of a sub group of Ceylinco; at a recently concluded high profile social of a new beverage company IPO launch.

In the high time sources reveal that, somewhere back in last week of October, Ceylinco Insurance PLC has send one of its officials to Singapore to sign the Shangri-La Insurance deal following the three day visit of Shangri-La head’s visit to the Sri Lanka.

Accordingly, CSE Leaks learns from Sri Lankan corporate sources that Ceylinco Insurance is sitting on a wealth management portfolio where island nation’s top companies insured under its policies such as HSBC-Sri Lanka, along with several other Banks and afforesting companies such as Touchwood PLC.

On the contrary another source from insurance industry in Sri Lanka told CSE Leaks that if Ceylinco has got insured the Shangri La hotel property that it will in turn boost the revenue of Ajita De Zoysa owned ADZ Insurance Brokers of Sri Lanka as many of Ceylinco’s Life and General Business that has to be Re-Insured has been Re-Insured via ADZ Insurance Brokers which has a partnership with one of the world’s leading risk managing and reinsuring  service provider Marsh.

Measnwhile, sources close to ADZ Insurance Brokers says that company is expecting to reach revenue amounting almost Rs.1 billion during this year.

During the last quarter of 2010 Hong Kong Based Shangri La Asia Limited announced the purchase of six acres of government land facing the Galle Face green promenade, a prominent landmark in Colombo, Sri Lanka.  The development will be a multi-use complex with high-end retail facilities, deluxe apartments and a 500-key luxury hotel to open in early 2014.  The purchase marks the entry of the hotel group into Sri Lanka, often referred to as “The Pearl of the Indian Ocean.” says Shangri la’s corporate website.

Shangri-La is also planning to develop a second property, a 300-key city resort on approximately 100 acres of land in Hambantota, on the southern coast of Sri Lanka, to be opened up in 2013.

“Sri Lanka is a country of unsurpassed natural beauty, rich in cultural heritage, and above all it is well recognised for its warm and hospitable population.  The local government is fully committed to rebuilding the economy following the end of three decades of conflict and we believe that Shangri-La will be able to assist in positioning the country as a prime global tourist destination.  Both Shangri-La hotels strategically fit into the group’s ongoing expansion plans to link the Indian subcontinent and our South East Asia developments,” Greg Dogan, President and CEO of Shangri-La International Hotel Management Ltd. reported to have said.

It is reported that Shangri-La Hotel chain had paid a premium price amounting to US $ 125 million for the property at Galle Face (Army headquarters) while the average price of a perch was around Rs.8.5 million.

Hong Kong-based Shangri-La Hotels and Resorts, one of the world’s premier hotel companies, currently owns and/or manages 70 hotels under the Shangri-La and Traders brands, with a rooms inventory of over 30,000.  Over almost four decades the group has established its brand hallmark of ‘hospitality from the heart.’  The group has a substantial development pipeline with projects in Austria, Canada, mainland China, India, Macau, Malaysia, Philippines, Mongolia, Russia, Qatar, Sri Lanka, Turkey and United Kingdom.