Did the founding Director of Amba Research Lanka Sanjay Kulatunga wanted to stop credit extension by market watchdog?

While Sri Lanka’s capital market watchdog Securities and Exchange Commission (SEC) further relaxed stock broker credit extension recently on 16 January 2012, it is now learnt from SEC inside sources that one influential individual in Colombo had been dragging the extension of broker provided credit due to vested interests he had in Colombo’s listed stocks, CSE Leaks learns.

SEC and CSE insiders outline that Sanjay Kulatunga who holds a series of Executive Directorships within the Beira Group of companies and a member among SEC Commissioners had been disliking the extension of broker provided credit to Sri Lankan investors since where he manage his stock investment portfolio the broker is not giving him credit at all.

Some sources also outline that Sanjay Kulatunga is also one of the top investors who had invested in Rs.6 per share private placement of Expolanka Holdings (EXPO) which offered Rs.14 per share in the IPO that was termed to be one of the only overpriced IPO’s in Sri Lanka’s Capital Market history that ‘Robbed’ Sri Lanka’s poor retail investors money in a IPO.

CSE and SEC insiders say that Kulatunga is a nominee in EXPO’s Board of Directors by Sri Lanka’s premier Bluechip John Keells Holdings PLC since John Keells had invested in 83.3 million shares of EXPO through EXPO’s unpopularized Private Placement. Kulatunga is also a Director of Amba Research Lanka-a stock market research firm, which he helped setup in 2003.According to CSE sources Kulatunga had been appointed to SEC as a Commissioner by a top finance ministry official who had vested interests with a Chairman of a premier blue chip conglomerate which probably would have nominated him there too.

Kulatunga’s Beira Group of companies, is a Group that is engaged in export manufacturing and import substitution. Prior to his stints as an entrepreneur and manager, Kulatunga functioned as an equities analyst for Hong Kong based Jardine Fleming Securities, starting in Colombo and culminating as a

Regional Real Estate Analyst in Hong Kong. He has a 1st Class Degree in Commerce from the University of Poona, India and an MBA from the University of Chicago, Booth School of Business. Kulatunga is also as associate member of the Chartered Institute of Management Accountants (ACMA) as well as a Chartered Financial Analyst (CFA).

Kulatunga is Non-Executive Independent Director at Expolanka Holdings PLC (EXPO) and Odel PLC (ODEL) in which a Private equity investor Phoenix Ventures Limited (2.49 million shares; 1.72% stake) given pre-listing stakes in ODEL later sold out after its initial public offer which was heavily oversubscribed, according to the firm's accounts in September 2010 and December 2010.

Meanwhile it is questionable according some SEC insiders whether Sanjay Kulatunga had another deal involved in the latest revamping of SEC Official website (www.sec.gov.lk) by Cyber Concepts (Pvt) Ltd (http://cyberconceptslk.net/dev_sec/?page_id=137&lang=en)  since it had learned from sources that Sanjay Kulatunga had earlier given a deal to the same company to develop a website for a company titled ‘Buzz Technologies (Pvt) Ltd. ‘ where Sanjay Kulatunga was the Chief Executive Officer.

That time Kulatunga had appreciated the work by Cyber Concepts (Pvt) Ltd adding that “We have worked with Cyber Concepts (Pvt) Ltd for the last 18 months, developing the…”

It is also learnt from industry sources that the latest development of SEC website was done by Cyber Concepts (Pvt) Ltd using a cheap web development technology such as wordpress freely available blog platform. Blog designs and Wordpress CMS designs are considered to be web platforms that are freely available which could be developed without much effort by changing few source codes.

Some investors and several top capital market industry professionals are also concerned how much SEC would have paid to the Ravi Rajapathirana (MD/CEO) of Cyber Concepts (Pvt) Ltd (ravi@cyberconceptslk.com) (skype id: ravira4437; mobile number +94 772242915) who is maintaining a foreign currency account number bearing 5011 4000 0026 or 5011 9000 0016 at Sampath Bank Ltd of Sri Lanka.

In Cyber Concepts official website it is clearly said that “We have successfully completed the securities exchange commission’s Content Management System. The CMS has been built on top of the popular blogging platform called WordPress”

“SEC is a body that is getting funded through public money and government funds.

It is a question; when there are top website developing companies in the country who can do a much better job why SEC had selected this particular company which had only done few simple website designs with free technology” another concerned investor and a member of the general public questioned.

It is anticipated that Price Bands will also be removed in next few weeks.

However, even certain insiders have been furious stating that all Commissioners of the SEC were keen to accommodate the Sri Lankan President’s wishes and Colombo Stock Brokers Association(CSBA) recommendations regarding Credit Extension and removal of price bands; except Sanjay Kulatunga. It is a well known fact that Sanjay Kulatunga and Sujeewa Mudalige had been against broker credit extension and blocked the removal of restrictions continuously at several past meetings according to known analysts and SEC insiders in the industry.

Over 100,000 investors at Colombo Stock Market have been deprived of credit from August 2010.  They have been lobbying against the credit restrictions and have been pushing Brokers to the pressurize the CSE and the SEC to remove restrictions. Brokers in turn had met and made representation to the Board of the CSE and got their approval and then met the Commissioners of the SEC. Then;as usual one or two Commissioners wanted more time to obtain data without coming to the meetings with the data. Thereafter, the President’s Office invited representatives of all the Stock Broking firms according to sources.

“Thank god that Sujeewa Mudalige is no more in the SEC Commission as his term as the ICASL President has ended. Now Sanjaya Kulatunga alone is going against all others and was finding ways to delay the removal of the restrictions” a top investor told CSE Leaks.

CSE sources further point out that the CSE has Rs 2.5 billion in money market instruments of Unit Trusts.“In case if one of the brokers fails to settle Rs.100 million to the CDS one day, then CSE can advance the money,  then could sell the stocks that had been overpurchased and recover the advanced funds. Even if any stock broking firm becomes a distressed one there are a number of companies that are willing to buy a stock broking firm within a day or two. Hence, there won’t any settlement failure” he added.

Meanwhile over 100,000 investors, 24 stock broking firms had been awaiting a positive decision on enabling Broking firms to leverage three times their net capital for which even the President of Sri Lanka had no objections. This is to enable Stock Broking firms to borrow from their holding companies or other financial institutions and lend to over 50,000 small investors.Finally SEC allowed it on Monday the 16 January 2012.

However at the Commission meeting held on 16thJanuary 2012, the Securities and Exchange Commission of Sri Lanka (SEC) had decided to permit Stock Broking Firms to leverage 3 times adjusted Net Capital with immediate effect. “Adjusted Net Capital” is the Net Capital computed as per the Colombo Stock Exchange (CSE) Member Regulations less 50% of Fixed Assets. In line with other regional markets, 50% was deducted to take into account the concerns of realizing illiquid assets into cash.

By permitting the Stock Broking Firms to leverage 3 times adjusted Net Capital, the additional credit available in the market will increase by Rs 5 billion resulting in the total credit available among Stock Broking Firms to Rs 8.7 billion.

Buckle Tight Regulator to be a Soul in CSE History: No More at Watch Dog’s House on All Souls Day

Sri Lanka’s No.1 Leaks site wants to inform readers exclusively with confirmed sources that with immediate effect Buckle Tight Regulator is out from his seat at the Market Watch Dog’s House. "He has submitted his resignation from office today after a Commission meeting" market source told CSE Leaks.

Investors in Sri Lanka view the ‘Buckle Tight’ as the person who brought in the ‘White Flag Incident’ to Colombo Bourse when he first gave a nod to impose a ‘Price band’ to Colombo’s rising stocks. That time some market analysts were in the opinion that Sri Lanka should follow Hong Kong rule of shooting Gunny Bags with the people who were responsible for leading stock market to a crash by ‘Over-regulation.’

With news out in York Street and Janadhipathi Mawatha and Fourth Floor at World Trade Centre Trading Floor market indices shoot up by 127 points (2%) before 1 p.m. on 2 November 2011.

Sri Lanka’s Buckle Tight Regulator may go home by end of 2011?

After many tight regulations he took to curb investors and brokers from so called manipulations since his appointment in 2010; Sri Lanka’s buckle tight regulator Malik Cader had been asked to leave from his position of Director General (DG) at the Securities and Exchange Commission of Sri Lanka; CSE Leaks learns.

'Accordingly by a special Cabinet paper decision he had been asked to leave his office', reports reveal. “He had asked for more time till 31 December 2011  but he will be removed early as 31 October 2011” a source close to SEC told CSE Leaks.

SEC Director Malik Cader at Aquaventure Dubai Water Park at  Atlantis Hotel at Dubai,
United Arab Emirates. Search for Malik Cader in facebook and
 investigate his investing friends in CSE
go to link: http://www.facebook.com/malik.cader?sk=friends 

Since the time when Cader took the DG seat he had been implementing so many rules in terms of regulation to CSE in what called to be the ‘Moves that are taken to develop a disciplined capital market in the country’. However it is now learnt from various stock market sources that although Malik Cader was acting as a highly disciplined regulator he had a circle of friends who had pushed up illiquid shares that has no value in the CSE; and those friends never got caught to Cader’s Rules.

“There’s an to head of a stock brokering firm who is called to be the Cashier of Malik” many other sources from Colombo Stock Exchange told CSE Leaks adding that industry officials are aware that particular top official charged money from ‘SEC caught investors and brokers’ telling them that he can sort the matter with Director General of SEC at several occassions.

At a time when Sri Lanka’s tourism is booming, in another development Sri Lankan stock market investors had been surprised by a new Hotel Development project coming up in tourism booming Pasikudah beach valued at an investment of nearly Rs.220 million or US $ 2 million that is yet to be constructed which is called to be a project jointly owned by a regulatory official at SEC and a head of a stock broking company with couple of Investors. “It is said this Leisure project coming up at Pasikudah is constructed by a capital market watchdog official’s father in law who runs a construction firm and who is a top architect in the island nation"Sources added. Now it is also learn from sources the Hotel is nearing completion.

Since Sri Lanka’s capital market watchdog got a new official, Malik Cader as the Director General of the Securities and Exchange Commission with effect from 2 November 2010, Sri Lanka’s Browns fame led subsidiaries and associates including Hydro Power Free Lanka (HPFL), Free Lanka Capital Holdings (FLCH), Browns Investments (BIL) had already been listed whilst Agstar Fertilizers, Sierra Constructions is yet to be listed in Colombo Bourse after an IPO or through ‘Introduction’ after a Private Placement. It is also learnt that several Browns fame investors made ‘Big Deals’ at a time when Malik Cader head the seat as DG in the capital market watchdog’s house in the island.

On the contrary ever since Securities and Exchange Commission Director General Malik Cader was appointed to DG seat Colombo Stock Market performance had been gradually dipping whilst retail investors had left market time to time since early January 2011.

Surprisingly when a published article in Sri Lanka’s Pink Paper;  Daily FT on 21 October 2011 questioned whether SEC DG ‘Malik Cader Out or In?’ the market indices shot up whilst stock prices soar with investors flocking up to CSE about the Good News that outlined the future of Malik Cader in Sri Lanka at the capital market watchdog’s house.

Joined as a Press Officer to SEC in mid 1980’s Malik Cader was the Director-Legal and Enforcement prior to being DG at the capital market watchdog’s house in Sri Lanka.

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.

Citrus Leisure PLC (REEF) to come up with couple of IPOs?

Citrus Leisure flagship Hotel at Hikkaduwa, Sri Lanka

After undergoing a management change in 2010, former Hotel Reefcomber PLC now Citrus Leisure (REEF) will come up with couple of IPOs on coming months to raise funds to their newest to ventures, an analyst told CSE Leaks.

Citrus Leisure in the last quarter of 2010 bought two new lands at Kalpitiya and Waskaduwa in a bid to build two new hotels with a view becoming a post war bullish fast growing hotel chain in the country.

“The IPOs might come in February” the analyst told CSE Leaks.

Citrus Leisure had earlier purchased 78 acres of land, known as Santhoduwa-Kalpitiya, to construct a four star resort in Kalpitiya in Sri Lanka. The proposed resort will feature 150 rooms and 28 water front villas. The water front villas will be constructed facing a 50 meter-wide waterway which cuts through the land and connects at the end to the sea. Murad Ismail, a Sri Lankan architect, has designed the resort.

The water villas will feature individual gondolas providing the occupants access to the sea. The villas will be made available to local and foreign high net worth individuals on a 99-year lease basis.

The ‘Santhoduwa-Kalpitiya’ site is ideally placed in close proximity to the whale- and dolphin-watching sites in the seas off Kalpitiya and the magnificent Wilpattu National Park, home to the elephant and the elusive Ceylon leopard.

Citrus Leisure will operate the villas as part of the hotel with the concurrence of their owners. The company has spent approximately Rs.122.18 million (US $1.1 million) for land acquisition.

The purchase is Citrus' second major acquisition. Earlier, the company had acquired a 7.2 acre beach property in Waskaduwa and it will commence construction work on the site in early 2011. The proposed scheme would be a 150-room, four-star property.

Sri Lanka’s home grown advertising giant Triad and its creative duo Dilith Jayaweera and Varuni Amunugama Fernando bought a majority stake in Reefcomber through Emagewise Ltd., a private venture of Triad Advertising in 2010 and rebranded the company as Citrus Leisure PLC.

MBSL M.R. Shah revealed; Will he secretly liquidate Ceylinco Investments & Realty?

Why did M.R. Shah send Gamini Karunathilake home? 

Left: M.R. Shah, while A.P.Gaminii Karunathilake opening the
City Branch of MBSL in September 2010 with M.R. Shah.

According to exclusive internal sources from Merchant Bank of Sri Lanka (MBSL), its present Chairman M.R. Shah is under many deals with regards to Ceylinco companies that he is managing under island nation’s Merchant Bank house, a subsidiary of Bankers to The Nation; Bank of Ceylon.

“M.R. Shah is secretly trying to liquidate the Standard Credit Lanka Limited former Ceylinco Investments & Realty Limited” a concerned depositor recently revealed in a letter to CSE Leaks.

However, when CSE Leaks tried to contact M.R. Shah he was not available for comments whilst no return calls were received when tried to contact Sanka Wijesinghe’s mobile who earlier headed Ceylinco Investments & Realty Limited under Ceylinco umbrella.

Back in August 2010, Ceylinco Investments & Realty was retiled as Standard Credit Lanka Limited under the supervision of its managing agent Merchant Bank of Sri Lanka (MBSL). That time Shah had said that company is not accepting any public deposits while it was spending nearly Rs.30 million per month to pay arrears and interests of customers. Shah had said company will start to accept public deposits soon and it had retained customer confidence among its 3800 depositors.

M.R. Shah had also said that the company has a five-year master plan to continue the pawning business opening its official pawning business centre at Union Place, Colombo.

Meanwhile reports reveal that Standard Credit Lanka Limited is close to finalising an Rs.100 million private placement deal with a new investor, Entrust Limited to convert 68% of their deposits into shares.

Entrust Limited now headed by a different board of directors is another former Ceylinco subsidiary, Ceylinco Shriram Securities Holdings which retiled under ‘Entrust’ brand in the wake of Golden Key financial fiasco. However,  following this capital restructuring exercise, Entrust would have the controlling stake amounting to over 51% of Standard Credit Lanka Limited . As per reports Entrust will come in to rescue to meet a Rs.648 million deposit liability of Standard Credit Lanka Limited.

Former Ceylinco Investments & Realty Limited now known as Standard Credit Lanka Limited will go for an Initial Public Offering (IPO) next year under the directives issued by the Monetary Board after this private placement deal with Entrust according to sources.

Sri Lanka’s former corporate whistleblower, the active Unionist M.R. Shah who was once the President Ceylon Bank Employee's Union (CBEU) today heads one of Sri Lanka’s top state owned investment banking subsidiary MBSL and manage fallen entities of Ceylinco such as The Finance PLC (TFC), The Finance & Guarantee Co. Ltd. (F&G), Ceylinco Building Society, Ceylinco Sussex School Network, Ceylinco Savings Bank (Now MBSL Savings Bank) and Ceylinco Investments & Realty Ltd. which is now Standard Credit Lanka Limited.

Ultimately, M.R. Shah is today sitting on boards which were once led by Lalith Kotelawala; who once slammed M.R. Shah by seeking damages of Rs.1 billion through filling a case against the M.R. Shah and his union and the union General Secretary for defamation back in November 2008.At the time it was said that in September 2008, Court issued an Enjoining Order restraining the CBEU, Shah and CBEU General Secretary from publishing and/or issuing and/or circulating any statement derogatory and/or defamatory of Kotelawala, while Shah had written to Seylan Bank PLC General Manager/CEO with a copy to the Labour Commissioner General containing statements derogatory and/or defamatory of Kotelawala while the enjoining order was in force.

Ceylinco Group Chairman Deshamanya Dr. Lalith Kotelawala on Tuesday filed a petition in the Colombo District Court against President M.R.Shah for alleged Contempt of Court.

The incident turned out when Whistle Blowing M.R. Shah’s Ceylon Bank Employees Union (CBEU) filed action against Seylan Bank PLC and its Founder Chairman Deshamanya Dr. Lalith Kotelawala in the Colombo District Court and obtained two enjoining orders against Seylan Bank and Kotelawala, refraining them from preventing Seylan Bank employees joining the CBEU and from interfering with its activities.

However, later both Seylan Bank and Kotelawala filed two Leave to Appeal applications with the Colombo High Court against the said enjoining orders. The High Court having heard the submissions made by Counsels for Seylan Bank and Kotelawala, and being satisfied that the CBEU had allegedly misrepresented facts to Court in obtaining the enjoining orders and that the CBEU has not presented a prima facie case, issued an interim order suspending the said enjoining orders. Further, High Court also granted Leave to Appeal to Seylan Bank and. Kotelawala at the time.

M.R. Shah Vs. A.P.Gamini Karunathilake

After assuming duties as Chairman of Merchant Bank of Sri Lanka PLC in June, 2010, later in December 2010, former whistle blower M.R. Shah suspended MBSL’s long standing Chief Executive Officer (CEO) and reputed banker, A.P.Gamini Karunathilake while internal sources from the bank said it was a personal grudge that may have led to the suspension of CEO by M.R.Shah who directed and internal investigation.

“Frankly to tell you, he has only taken one extra salary and kept the one of company owned cars at home” said a source from MBSL to CSE Leaks revealing about the background of A.P.G. Karunathilake’s suspension.

Banking sources say that State Merchant Bank is much indebted to Karunathilake who had brought about a steady growth after taking over the administration from Sunil Wijesinghe in 2005 who ran a dud porcelain company, Dankotuwa Porcelain (DPL) until Sri Lanka’s trail blazer company Environmental Resources Investment PLC (GREG) came into rescue of Wijesinghe’s porcelain entity. A.P.Gamini Karunathilake is said to have hurdled major operations that lifted the MBSL from a crisis to a sound position.

However, on 3 January 2011, Merchant Bank of Sri Lanka (MBSL) Chief Executive Officer Gamini Karunathilake got an enjoining order from the District Court of Colombo against his suspension beating former whistleblower M.R. Shah’s so called ‘baseless’ misconduct allegations that were un-described.

Karunatillake is a professional banker with over 30 years of experience. He obtained a B.Com (Hon) Degree from the University of Sri Jayewardenepura and an MBA from the Post Graduate Institute of Management (PIM) of Sri Lanka. He is a fellow member of the Institute of Bankers of Sri Lanka and was a visiting lecturer on ‘Law and Practice of Banking’ for the Bachelor of Commerce and Economics Degree programmes and on ‘Banking and Finance’ for the MSc. Management Programme at the University of Sri Jayewardenepura. He also served as a lecturer and Chief Examiner on ‘Law and Practice of Banking’ and ‘Practice of Banking’ at the Institute of Bankers of Sri Lanka. He was also a Director of Merchant Credit of Sri Lanka Ltd.

Why GREG drastically fell, was it to facilitate Nimal Perera, or Did Nimal Perera sell his GREG shares?

Nimal Perera sipping some Wine
at a High Exclusive Corporate Event

High Exclusive sources close to Colombo Stock Exchange revealed CSE Leaks that High net worth investor Nimal Perera had sold his GREG or famous Environmental Resources Investment (ERI) PLC shares before the week ended 23 January 2011 as the share shot up high again to above Rs.100 and along with slight appreciations in the warrants.

However, as at 30 September 2010, according to Quarterly report of ERI PLC Nimal Perera had 2.34 million GREG shares which amounted to 0.75% of the company.

Some sources say that he has sold this stake to put money for Vallibel One IPO where he is also on Director board; However it could be now derived according to our analysis may be that Nimal Perera had applied for a few more shares of Vallibel One to profit from CSE when it is listed and since he would have applied by a Bank Guarantee he would have sold his GREG shares to partly settle the money for Bank Guarantee’s Bank Charges.