The Finance Company (TFC), the oldest finance company in Sri Lanka, with a 70 year history of operations is to be reinvigorated in the New Year 2011 by infusing fresh capital of around Rs.1.6 billion through an ambitious share issue of 40 million ordinary shares at Rs. 40 each.
The public offering, is to be rolled out on January 11. Speaking to the Business Times, Kamal Yatawara, chief executive of TFC said that the share issue is aimed at attracting strategic investors capable of infusing funds and playing an effective leadership role in managing the firm. He revealed that the company has taken a decision to provide an opportunity for approximately 10% of the existing deposits in TFC to be converted into 100 million non-voting shares of Rs.20 each, thereby converting deposits in the sum of Rs. 2 billion into equity.
He said “this would enable the depositors to have an equity stake in TFC, a listed company and it will also enable TFC to reduce its current liabilities and improve its balance sheet”. He stressed that the Central Bank is overseeing the implementation of these measures while ensuring an equitable allocation of shares among investors in the interest of long term stability of the company and the financial system. The firm has been able to attract new deposits valued at Rs.300 million per month expanding the number of depositors up to 200,000, he revealed.
The third quarter forecast for the 2010-11 financial year shows a consistent growth across all financial services and product categories of the company. New deposits have grown by 47% during the last quarter. This is as a result of the confidence expressed by the depositors.
TFC has also announced that 85% of its depositors are consenting to their deposits being renewed at maturity, he revealed.
Mr. Yatawara noted that the company is to be managed by a competent Board of Directors representing the shareholders so that the Managing Agent, Merchant Bank of Sri Lanka (MBSL), could exit from the operations of TFC as the company stability has already been restored.
He disclosed that the TFC with an asset base of Rs.30 billion and a deposit base of Rs.27 billion will be reinvigorating its product portfolio of savings, deposits, land sales, pawning, hire purchase, leasing, education loans and special speed loans with new customer care initiatives and confidence building exercises with the aim of positioning the firm as the leading finance institution in the country.
The company has the largest deposit base in the non-banking finance category of the country. TFC also has the largest network of outlets numbering up to 60 and spread across the island. “With the recent developments in the economy and the peaceful environment prevailing in the island, TFC plans to focus its attention on land sales, pawning and leasing of vehicles as there will be ample business opportunities coming up in the financial sector in the near future,” he said.
They have earmarked to sell 3,500 blocks of land countrywide under the new business plan considering its achievement of selling 350 blocks during the month of October 2010. "We have a (cash) inflow of 700 million (rupees) a month of which 300 million goes out as interest payments and another 250 million goes out as capital payments," he said.
The real estate arm brings in 40% of TFC's business, while the hire purchase unit contributes the rest, Mr.. Yatawara said.
TFC has over Rs 4.5 billion invested in real estate assets, he said. Outlining the progress in their pawning business he said that eight new pawning outlets in Horana, Anuradhapura, Kegalle, Dambulla, Elpitiya, Nikaweratiya, Nawalapitiya and Wellawaya were also opened.
The company’s greatest strength was its recoveries and only four cases of default were reported out of 3,000 cases, he added.
As a result of regaining its public confidence and the directive of the Central Bank to recapitalise the company, TFC says it’s well poised to forge a solid financial momentum in the New Year.
The finance Company has been rated as the 27th most respected brand in Sri Lanka under Brand Finance valuation list