Financial Times - CSE writes to Apollo on BOI’s ownership stance

The Colombo Stock Exchange (CSE) has written to Lanka Hospital Ltd, owners of Apollo Hospitals, seeking clarification whether the incentive package offered by the Board of Investment (BOI) was granted to a ‘particular set of investors’ or to the company itself.

An industry source told The Sunday Times FT that the CSE is considering this as material information. “What the CSE wants to know is whether the BOI incentives were given to Dr. Reddy and family or to the Apollo Hospitals. None of this has been stated in the initial public offering (IPO) prospects,” the source said.

He said this surfaced with the recent media attention when the takeovers and merges code was triggered by Sri Lanka Insurance Corporation General Fund (SLIC) when it purchased a 16 percent stake of the company, thus increasing its combined holding to 36 percent (SLIC Life fund holds 20 percent), and triggering a mandatory offer for the latter at Rs.28 per share.

“When it was reported in the media that the BOI was planning to slash the incentives given to Apollo, the CSE picked it up as material information,” he added. He said if the BOI concessions were granted only to the Reddy family, when the ownership changes hands, then other investors are not benefited. “This should have been included in the IPO prospects when the company decided to go public,” he stressed. Nihal Fonseka, Chairman Colombo Stock Exchange (CSE) confirmed that the Director-General of the CSE has written to Lanka Hospitals but declined to disclose details “We are only concerned about the procedures,” he said. Apollo reported an increased net loss of Rs.14 million for the first quarter (2006-07) compared to a net loss of Rs.1 million in the same period last year.

The company’s revenue only increased by a modest six percent to Rs 460 million with an 18 percent increase in staff costs which resulted in operational profits falling 20 percent to Rs.33 million. SLIC is currently the largest shareholder of the company, while Apollo Hospitals Enterprises of India owns 33 percent.