Listing on CSE benefits companies - Industry leaders

Market capitalisation of the CSE amounts to less than 30% of Sri Lanka's annual GDP, CSE Chairman Krishan Balendra told the Issuer Relations Forum organised by the Colombo Stock Exchange at the Cinnamon Grand recently.

In comparison, the total value of the stock exchanges in the region as compared to GDP amounted to 180% on average, with exchanges in countries such as Malaysia and Singapore exceeding 200% of their annual GDP.

As such the forum aimed at engaging and encouraging companies to list on the CSE, while addressing the concerns they voiced, Balendra said.

Representatives from top firms such as the Akbar Brothers, Allianz Insurance Lanka Limited, Asian Hotels and Properties, Amana Bank, Ceylon Biscuits Ltd, Brandix Lanka, Hameedia Stores, Jetwing Hotels, Richard Pieris, Softlogic Retail and the Tudawe Brothers were present.

CEO of Peoples Leasing and Finance PLC, D. P. Kumarage said that the company experienced strong growth from the outset - 120%. Eventually, the company needed to enter a new growth phase without imbalancing their debt-equity ratio, and listing on the CSE provided the perfect springboard propelling them towards further growth.

Chairman of Laugfs Holdings PLC, W K H Wegapitiya said that far too many home-grown companies entered a 'Bermuda triangle' when it came to the growth momentum phase. Laugfs on the other hand wanted to ensure sustainable growth by broad-basing their ownership.

Wegapitiya said that Laugfs was planning to list five more companies on the CSE, adding that it was the perfect time to do so.

Wegapitiya discussed various 'myths' which exist in the market regarding listing on the CSE, including giving up control of the company and the need to disclose everything about the way the company is run.

CEO of Odel, Otara Gunawardene said while it had been a difficult decision, listing had ultimately been for the benefit of the company. The changes were few and it was a fast, clean process in terms of valuation, giving Odel room to grow from strength to strength. Disclosures too were limited and there was no need to give away trade secrets, the panellists said.

However, all the panellists agreed that some preparation had to be made before listing a company on the CSE, such as streamlining systems and processes to changing the culture of the company.

Assistant General Manager of Regulatory Affairs at CSE, Renuke Wijayawardhane said that this year Rs. 30 billion was raised by debt issuers, adding that market capitalisation has doubled since 2009, showing huge potential for growth.

Companies which list could raise long term funds, especially if they were looking to fund further growth without raising their debts. Listed companies could tap into a huge investor base and would no longer be limited by the owner's capacity to introduce capital, Wijayawardhane said.

Apart from this, the company's corporate profile would be enhanced, with plenty of publicity along with the publication of financial statements. Listed companies are also usually valued higher compared to unlisted companies.

The Diri Savi Board opened up new opportunities for smaller companies exploring the possibility of listing with less onerous requirements. Companies needed a stated capital of Rs. 100 million, a one year record of operations and positive net assets for the last financial year and a public float of 10%, Wijayawardhane said. Consulting with an investment bank before approaching the CSE would make the process much easier and faster, Wijayawardhane said.

It is equally important to attract long term investors rather than retail investors as this could introduce volatility, he said.