Plans for new investor at People’s Merchant Bank nearing finalisation

Efforts to bring in a new investor with capital for the People’s Merchant Bank PLC is nearing finalisation, the company said this week.

The new unnamed proposed investor and the company, along with parent companies People’s Bank and People’s Leasing and Finance are currently at the last stage of finalising the terms for infusion of capital by the new investor to meet the Central Bank requirement with regard to core capital. People’s Bank holds a 50.1% stake in the company and PLC holds a 37% stake.  

This is following the completion of a legal and financial due diligence on the part of People’s Merchant Bank.

The company began searching for a new investor to infuse capital after its auditors in FY18 Accounts raised a significant doubt about its ability to continue as a going concern, even though no adjustments have been made in the financial statements as the Board of Directors are confident that the company will continue as a going concern and the auditors have not qualified their opinion on the matter. 

However, due to the “Emphasis of Matter on Going Concern” the securities of the company were transferred to the Watch List of the Colombo Stock Exchange in July 2018. 

Pursuant to a direction issued by the Central Bank, the company was required either to negotiate with investors and finalise the capital infusion or complete the proposed merger with the PLC. In May, Central Bank granted an extension of six months till 30 September for the Company to effect the merger with PLC. But latest disclosure suggests the Company is pursuing a new investor as opposed to a merger.  

As at 30 September, retained loss at Peoples Merchant Finance was Rs. 873 million. Assets amounted to Rs. 3.4 billion up by 16% from end FY and liabilities were Rs. 3.2 billion up by 17.5% from end FY18. Total equity was Rs. 213 million.

For the six months ended 30 September, total operating income of the company rose by 280% to Rs. 129.7 million but operating profit before VAT and NBT was Rs. 5 million. This is better compared with the Rs. 68 million loss a year earlier. After tax loss in first half of FY19 was Rs. 3 million, lower in comparison to the Rs. 68 million loss.