Stock market identified as willing and able source to fund digital transformation

Those who were present at the webinar were capital market and tech industry experts including; FITIS Chairman Abbas Kamrudeen, ICTA Director/legal advisor Jayantha Fernando, CSE CEO Rajeeva Bandaranaike, CSE Chief Regulatory Officer Renuke Wijayawardhane and PickMe Founder/CEO Jiffry Zulfer

The Federation of Information Technology Industry Sri Lanka (FITIS), the Colombo Stock Exchange (CSE) and the Information and Communication Technology Agency (ICTA) recently conducted a webinar titled ‘Financing Digital Transformation: Is Going Public the Next Step?’, focusing on how companies in the IT industry can now consider a stock exchange listing in view of the recent changes to CSE listing eligibility. 

The discussion focused on the expansion of the eligibility criteria for an initial listing of shares on the Main Board and the Diri Savi Board which will now enable a wider spectrum of companies to qualify for a listing. 

The webinar featured capital market and tech industry experts including FITIS Chairman Abbas Kamrudeen, ICTA Director/legal advisor Jayantha Fernando, CSE CEO Rajeeva Bandaranaike, CSE Chief Regulatory Officer Renuke Wijayawardhane and PickMe Founder/CEO Jiffry Zulfer.

Jayantha Fernando stated that global success stories have helped catalyse a shift among private-company leadership toward viewing public markets as a more welcoming place to raise capital. He also went on to state that the stock market engine should be recognised as a tool within this ecosystem which, if correctly used, could pave the way for not only companies to grow but for the economy at large to grow as well. 

Sharing remarks at the webinar, FITIS Chairman Abbas Kamrudeen said, “When it comes to financing there are many options companies can evaluate from bootstrapping, Angel investors, debt capital, Venture Capital to private equity. But my belief is that for those companies that have matured to some extent, there is no better option to financing than going public. The reason being, it not only gives you flexibility and speed in future rounds of financing, but it will allow you to understand the true value of your organisation.”

Rajeeva Bandaranaike shared perspective on the rationale for the CSE to revamp its listing requirements to cater to an ever-evolving business landscape in Sri Lanka consisting of modern and dynamic business models, which are particularly seen in the technology space. He went on to state that these new changes are now well placed to attract a wave of tech companies to the local stock market. 

Renuke Wijayawardhane highlighting these new avenues for companies stated, “Companies that ideally could not look at a listing on the main board as a result of the three consecutive year profit requirement now have other options. Companies with positive net assets for two financial years could list on the CSE with an aggregate net profit after tax for three years, an alternate which does not require companies to be profitable for three consecutive years.”

Renuke also went on to say, “To broaden the entry routes, we have also introduced revenue and cashflow options in addition to the two profit-based routes. Companies could now demonstrate either an aggregate revenue of Rs. 3 billion for three financial years or positive operating cashflow after adjusting for working capital for two consecutive years. The revenue and cashflow route could be explored by companies capable of demonstrating a market capitalisation of Rs. 5 billion or more at the point of listing.” 

Companies have also been given the opportunity of listing on the Diri Savi Board by demonstrating a revenue of Rs. 350 million for the financial year immediately preceding the date of the initial listing application and a market capitalisation of Rs. 2 billion at the point of listing,” he added.

Speaking from an investment bank’s perspective, NDB Investment Bank Head – Corporate Advisory Nilendra Weerasinghe noted the progressive steps taken by the CSE to encourage tech companies to raise capital in the public markets and went on to say, “We need more private capital flows to support SMEs and startups to make it to the big league. In doing this, policies which incentivise private capital investments into angel and venture capital fund like structures could catalyse this space having a significant impact on the broader economy.”

Renowned tech entrepreneur and CEO of Pickme Jiffry Zulfer identified the stock market listing as an ideal exit option for investors and private equity firms investing in start-ups. He went on to note that having the stock market listing as an option and a possible exit mechanism will help the growth of the start-up ecosystem in Sri Lanka by attracting a wider audience of investors who see the value of a market-based exit mechanism. 

Companies are invited to connect with the CSE to discuss how they can now tap into public funding to spur on the company’s growth agenda. Details on eligibility of listing and the process could also be obtained through www.cse.lk or by sending an email to [email protected].