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Largest IPO ever: Govt. bid to control LTL thru’ CPC worries investors
View(s):The largest initial public offering in the history of Sri Lanka’s stock exchange—the LTL Holdings IPO—is likely to be scuppered after private investors were spooked by government plans to retain control of the company by getting the Ceylon Petroleum Corporation (CPC) to dump Rs. 8bn on 597,267,000 shares.
“Private investors, institutional as well as high-net-worth individuals (HNWIs), are not willing to invest in a company in which the State is going to have majority control,” a market analyst said. He did not wish to be named.
A senior Power Ministry official confirmed that LTL has written to the government indicating that it was reconsidering the IPO. A formal board decision is yet to be made.
LTL launched its IPO in late 2024 to raise Rs. 20bn from the market for two major projects: the construction of Sahasdhanavi Ltd., a 350MW combined cycle power plant in Kerawalapitiya, and to invest in the 100MW Siyambalanduwa solar power project called Rividhanavi Ltd.
Initially, litigation in the Supreme Court delayed the process. After that was cleared, the Securities Exchange Commission (SEC) fixed the IPO opening for December 5, 2024. However, a day before the scheduled date, the SEC instructed the Colombo Stock Exchange not to proceed, saying one of the projects (Sahasdhanavi) was under review and the new
government needed time to decide on it.
Sahasdhanavi has since progressed with the power purchase agreement having been signed. While it is now a matter of opening the IPO, LTL is said to be re-evaluating its position, as its investment adviser has warned the share might even be undersubscribed.
At present, the State holds majority control of LTL through stakes held by the Ceylon Electricity Board (CEB) (35%) and West Coast Power (Pvt) Ltd (28%)—in which the major shareholders are the Treasury, the Lanka Electricity Company (Pvt) Ltd and the Employees’ Provident Fund.
It had been hoped that the IPO would dilute the State’s share and open the company up to private investors, thereby allowing for greater flexibility as well as less political and bureaucratic interference, industry sources said.
However, the Cabinet has approved a proposal to authorise CPC—which, while under the control of the Energy Ministry, is not directly related to power generation and not regulated by the Public Utility Commission of Sri Lanka (PUCSL)—to invest in or subscribe to shares of LTL Holdings worth Rs 8,660,371,500 to acquire 597,267,000 shares.
It was also approved to direct the management of LTL Holdings to allocate the said number of shares from the IPO on a preferential basis/quotation.
An LTL proposal for the State to wield veto power through a golden share “was not entertained,” the sources said. “Under what has been sanctioned by the Cabinet, government control will continue,” they pointed out. “Once the CPC, which is not an investment company, puts in Rs 8bn, LTL still has to raise the remaining Rs 12bn from the market. But cornerstone investors have indicated they are no longer willing to put in the money, especially as profitability cannot be maintained in a State-controlled business.”
Cornerstone investors are large institutional investors who commit to purchasing a significant portion of shares in a company’s IPO before it’s offered to the wider public.
“When they hesitate, it affects market confidence, and this share could even be undersubscribed,” the sources said. “That is bad for the institution, and we hear LTL’s investment advisers are telling them not to open the IPO, as the prearranged investors are pulling back.”
The CPC is not an investment company.
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