Questions continue to be raised by the public on the soundness of The Finance Company (TFC) and why the state-owned National Savings Bank (NSB) decided to buy shares in the loss-making company after TFC's results released this week showed a Rs 196.7 million loss in the last financial year ending March 31, 2012, analysts said.
The report also showed that the Employees Provident Fund (EPF) has an 8.43% stake in the TFC.
The loss however was much lower that the loss of Rs 3.8 billion in the previous year. Yet in the last three months alone up to March 31, the company lost Rs 212.6 million, according to its accounts released this week. No reason was given for this sharp loss.
The Central Bank stepped in this week in support of the firm, saying in a statement that TFC is a stable company.
The NSB re-sold its 13% stake in the company after a major hue and a cry over the transaction which was traded at a higher-than-the-market price. On this issue, the NSB chairman Pradeepa Kariyawasam resigned along with other members of the board.
Allegations of insider trading have also figured in the NSB-TFC transaction. Some analysts also questioned a statement by TFC Chairman Preethi Jayawardene to a newspaper soon after the NSB stake was criticized, saying that it was a strategic purchase based on the future progress of the company.
“How can the TFC chairman speak for another buyer? Was there advance information shared between the two on the prospects of the company in the future?” asked one analyst.
However at a media conference this week, company officials re-iterated that the transaction between the buyer (NSB) and the sellers (two directors of TFC and other shareholders) was strictly a private affair with no TFC involvement.
This week’s annual report said the major shareholders are NDB/T. Senthiverl – 11.79%; Ceylinco Investment – 11.04 %; Seylan Bank/T.Senthiverl – 8.9 %; EPF – 8.4 %, Seylan Bank A/C no 3 - 7.44 % and Bank of Ceylon A/C Ceybank Unit Trust – 5.7 %
The report also said among non-voting shareholders, the Bishop of Galle is the largest with 1.9 million shares or 1.97% of the total shareholdings. The Bishop and many other non-voting shareholders are believed to be former depositors who were offered the option of transforming their deposits to shares under a recovery plan as the company was unable at the time to return their monies.
The Central Bank’s statement this week said that TFC is currently implementing a restructuring plan and accordingly it was able to increase its total deposits by 5.36% and its total lending portfolio by 11%.
“It is fulfilling its obligations satisfactorily in accordance with the restructuring plan and the conditions imposed by the Central Bank of Sri Lanka. In these circumstances the public is hereby informed that The Finance Co. is a stable finance company,” the CB said.