Bank of Ceylon’s (BOC) subsidiary, Merchant Bank of Sri Lanka and Finance PLC (MBSL) plans to raise Rs. 2.24 billion in fresh capital via a Rights Issue. The main purpose of the issue is to comply with the minimum capital rules of the Central Bank of Sri Lanka (CBSL). Approval for the capital raising has been obtained from the Boards of MBSL, its majority owner BoC and the regulator, Central Bank of Sri Lanka (CBSL).
Exhibiting full confidence in the capital-raising effort and the management of their majority-owned subsidiary and thereby guaranteeing a successful outcome to the capital raising effort, BoC with a near 75% direct ownership stake in MBSL will be subscribing for its entire entitlement in full.
The issue will be based on 9 new shares for 4 held, resulting in the issuance of 373.2 million new shares at Rs. 6 each. The stated capital of MBSL at present is Rs. 2.12 billion. The MBSL share price closed at 6.90 on August 4, 2021, 15% above the 52-week low of Rs. 6 set on April 07, 2021. Its net asset value as of March 31, 2021, was Rs. 10.42, up from Rs. 8.85 at year-end 2020, a growth of near 18%. The percentage of MBSL shares held by the public numbering some 10,900 shareholders as of March 31, 2021, was 25.51%.
This Rights Issue is the culmination of MBSL efforts to regain momentum after reporting a loss in 2020. Its turnaround came in quick succession. For the 1st quarter of 2021, MBSL reported a profit, a near 265% growth compared to the pre-tax loss recorded in the same period in 2020. The profit turnaround was based on a 70% increase in Net Interest Income, compared to the same period in 2020.
BoC and MBSL Chairman Kanchana Ratwatte said, “Based on their historic achievements, their recent performance and potential resulting from government initiatives for domestic industry, we believe the investment is justified and look forward to a beneficial outcome”.
Referring to the rights issue Dammika Hapuhinna, the newly appointed CEO of MBSL said, “The capital raised will enable MBSL, for their part to comfortably meet regulatory and funding requirements going forward and provide a stronger base on which to achieve its medium-term goals.”
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