Financial Times

Lanka Ventures Limited (LVL) is striving hard to find good investment opportunities despite many firms not exploring listing options.

“Regrettably, promoters of many companies, especially those that are medium sized and are good candidates for public listing, appear unconvinced that listing is a desirable option to unlock their capital and raise additional capital,” Nihal Fonseka, Chairman, LVL has said in his annual review for 2005-06.

He has said that this has come about mainly due to losing management control, reluctance to meet stringent disclosure and complex listing requirements coupled with the intense competition among banks to provide loan funding to high quality companies. These are all factors that work against new listings being sought by successful business.

“As a result the majority of our exits are achieved through redemptions or sale of investment back to the promoters. Both methods are less than ideal from our perspective,” he has said. In the previous year, LVL exited from one investment through the stock market realizing a substantial capital gain clearly demonstrating the value of maximizing exits through the stock market. However he has said that despite several adverse factors in the environment, LVL will strive hard to identify good investment opportunities.

LVL recorded a total income of Rs.112 million compared to Rs.136 million in the previous year. “This was largely due to the decline in investment income from Rs.101 million to Rs.75 million. Interest income on the other hand increased marginally to Rs.38 million from Rs.35 million in the previous year. Notwithstanding the decline in investment income, about two thirds of the gross income was derived from investments with interest income accounting for the balance,” Fonseka has said. He has said that the drop in investment income was mainly due to lower income from the sale of venture capital investments.

Profit from sale of listed investment securities increased to Rs.26 million from Rs. 3 million in the previous year whilst dividend income increased to Rs. 21 million from Rs.15 million. “Taking advantage of the buoyant conditions that prevailed in the stock market in the first half of the year LVL exited from several stock-market investments at a substantial profit. As a result LVL’s exposure to the stock market in terms of cost which peaked at Rs.114 million in August 2005 declined to Rs.71 million by October 2005. The income realised from the sale of these investments somewhat compensated for the lower profit from the sale of venture capital investments,” Fonseka has added. (RI)

Meanwhile, LVL’s venture capital investment portfolio net of provisions declined to Rs. 288 million from Rs.303 million. “This was mainly due to Rs. 85 million in divestments and redemptions exceeding the total disbursements of Rs. 75 million during the year,” he has said, adding that the net provision of Rs. 5 million for the year in respect of diminution in value of investments also impacted the size of the venture capital investment portfolio at the year end. Total approvals during the year amounted to Rs. 105 million. (RI)