PLC shares debut on CSE today

Shares of People’s Leasing Company Ltd. (PLC), which successfully concluded the country’s biggest IPO worth Rs. 7 billion by a home-grown enterprise, will debut today on the Colombo Stock Exchange (CSE).

Classified under the Banks, Finance and Insurance sector, 1.56 billion shares of PLC will be listed on the Main Board of the CSE.

The debut follows PLC’s Initial Public Offering of 390 million ordinary voting shares at Rs. 18 each being oversubscribed by 1.8 times, drawing 9,843 applications worth Rs. 9.5 billion.

Most analysts as well as PLC have been encouraged by the success of the IPO, which was amidst highly-depressed market conditions. Originally many thought that, given the sheer size, the IPO wouldn’t make it through.

The most striking facet of the IPO was the fact that a massive customer base of leasing industry leader PLC became direct shareholders of the company. It is estimated that around 5,000 customers reposed faith and confidence in PLC by subscribing to the IPO. Most of these customers are new entrants to equity investments and have come onboard with medium to long term mindset.

“We had the valuation and pricing right and they were transparent. That apart, strong fundamentals aided by our proven track record reinforced investor confidence,” PLC’s longstanding Chief Executive Officer D.P. Kumarage said, with regard to key factors for the success of the biggest-ever share issue, beating negative sentiments on the overall market.

Additionally, there had been strong foreign interest on PLC shares with non-national investors absorbing almost the entirety of the quantum allocated to them. The PLC had brought in Rs. 2.06 billion worth of foreign investment, making it one of the biggest non-national engagement in an IPO. Of the 10 foreign funds who participated in the IPO, three are new investors from South East Asia.

Analysts, who had been tracking the IPO as well as road shows conducted in Singapore, Hong Kong and India, said that given the stature of PLC both in the market and in the industry, there would be strong foreign appetite among discerning frontier market-centric foreign investors.

“During the road shows, foreign fund managers were convinced about Sri Lanka’s post war growth story in an era of peace and political stability. These are plus factors for Asia-centric investors,” analysts added.

Enjoying a market share of over 20% PLC is the biggest player in the leasing industry, which has slightly over 40 companies vying for business.

Having begun with a capital of Rs. 10 million one-and-a-half decades ago, today PLC is Rs. 65 billion worth asset-strong. In FY2011, its after tax profit was a whopping Rs. 2.58 billion, up from Rs. 1.2 billion in the previous year and reflecting a compound annual growth rate of 36%. Top line, enjoying a 12% CAGR, was Rs. 9.8 billion in FY2011.

The phenomenal growth in assets had been whilst ensuring top quality with a non performing loan ratio of a mere 1.2% as at March 2011. The leasing industry is estimated to grow by 25% per annum over the next few years.

This week PLC reported a 2Q2012 net profit of 65% to Rs. 790 million supported by higher vehicle sales, increase in the Islamic finance business and lower provisioning during the period. PLC’s interest income meanwhile grew by 56% to Rs. 3.2 billion while net interest income rose by 32.5% to Rs. 1.6 billion.

The rolling out of window offices in interior areas of parent People’s Bank branches has given PLC a tremendous leeway to further bolster its business, 70% of which is leasing of commercial vehicles.

Kumarage said that the success of PLC’s IPO should be both an eye-opener and a source of encouragement for big players in different industries to consider listing, provided they can come with a clean sheeted issue aided by sound fundamentals and a solid future growth model.

Joint managers to the PLC IPO were NDB Investment Bank and Capital Alliance Holdings.

To make the IPO a success, a 30% allocation has been set aside for Identified Investor Category which includes foreigners. Retailers will get 22.5% share and non-retail will get 27.5% along with 10% for Unit Trust and 10% for employees out of the IPO quantity.