Major capital market players representing both foreign and local interests said that the economic situation in the country is currently conducive to merger and acquisition investments.
Managing Director of NDB Zephyr Senaka Kakiriwaragodage said that this was a once in a century event and that risks should be taken if one was confident that the underlying asset can pull through the crisis. Kakiriwaragodage was speaking on the PWC webinar series on April 28.
Kakiriwaragodage said that his company usually concentrated on companies seeking capital for growth but given the current context they were looking at any company that had a capital requirement for survival. He predicted that bigger companies could take in smaller companies. He said, “It could happen in a friendly manner or an acquisition manner.”
Head of strategy and business development at CHEC Port City Colombo Thulci Aluwihare said that given the 25-year nature of the Port City project there would be little impact by the crisis on its grand scheme. The project was to have a sales event in Singapore which has been postponed. The company is considering delaying infrastructure investments to be in line with sales and marketing promotion. The Port City is also waiting on elections to be able to pass legislation granting the region as a special economic zone which is currently with the Attorney General’s office.
DEG Investments local representative Geeth Balasuriya said that his company was being approached by companies for capital. The organization will now also consider smaller companies. He said that it is difficult for companies to go to the banks given already high gearing ratios. He said that due to the attractive financial ratios globally, the growth in opportunities due to the crisis, and the stronger macroeconomic fundamentals of peer countries it was likely that foreign investors would look outside Sri Lanka.
Kakiriwaragodage said “banks are in a dilemma. They need to support their customers and they have a fiduciary responsibility to depositors. You can’t lend to anyone who is in trouble.” Panelists felt that debt availability was going to dry up. They felt that the financial services sector would have delayed consolidation plans activated.
The power sector is expected to have a limited impact during the crisis.
Kakiriwaragodage expected companies to take special consideration in managing their cash flow. He speculated that companies would face difficulties in making assumptions on the length of the crisis and as such should be wary of underestimating their cash requirements. He predicted that companies would take measures to save as much cash as they could.
0 comments: