Thursday, 17 October 2013 00:00
The first panel discussion at the forum looked at the first four areas – CFO’s role, current economic impact in business, how companies have structured their capital and funding and rising from this looking at mergers and acquisitions and its current status. Panel one featured LOLC Group CFO Sunjeevani Kotakadeniya, Seylan Bank CGO Ramesh Jayasekara and Hemas Holdings CFO Malinga Arsakularatne and was moderated by MTI Corporate Finance Associate Consultant Mano Tittawella. Below are excerpts from the panellists’ comments:LOLC Group CFO Sunjeevani Kotakadeniya
While there was only a 14% representation of females as CFOs, Kotakadeniya noted that this was not an issue that is related to gender biasness. A CFO’s role is a very challenging role in an organisation as a CFO is required to be present in A-Z of an operation, she said. “We have to change our hats from one to another all the time. Balancing the official role with a CFO and the personal role of managing the home-front is not an easy task. This is probably the reason for the low representation,” Kotakadeniya said.
She also expressed surprise to see M&A as a not popular area and that more are keen on an organic growth. “From the company I come from, we have M&As all the time and we as a group look at it in a very positive way of growing. We have expanded the way we do business and capitalised on opportunities available in the market.”
However, a key challenge in going for an M&A for organisations is being able to change, she said. “Finding a capital structure is also a challenge for CFOs and organisations as a whole.”
Seylan Bank CFO Ramesh Jayasekara
The saying on astrologer vs. coroner correctly epitomises the role of a CFO, Jayasekara said. “A lot of people want us to predict the future. The role has evolved significantly from a score keeper to a strategic partner – that is the role evolution.”
He admitted that he believed CFO needs to be at the centre of an organisation as a CFO plays a key role in terms of strategy direction.
Touching on capital structure, he noted that it is probably different for banks. “Coming from a bank, our growth is tagged purely to capital. We have a five year plan and we know the growth levels we want to achieve and the sufficient capital needed to achieve this. It is therefore different to a manufacturing company.”
Jayasekera outlined: “we all know debt is cheaper than equity because it has tax efficiencies to it. The question CFOs must ask is as to what levels of debt is the optimal level and bring in value.” Commenting on Seylan Bank’s debenture issue in February, he stated that while the debenture was on the cards, it was from last year after budget tax incentives.
In terms of banks he noted that capital structuring is done very well. Quoting Warren Buffet he asserted that what needs to be borne in mind is that two companies need to create incremental value when adding company A and B and create synergy in terms of the acquisition. “The numbers need to make sense and must leave room for error which means acquisition might not happen as per paper. You need to leave room for a margin of error and if it makes sense, it’s a good M&A.”
Hemas Holdings CFO Malinga Arsakularatne
A CFO has a dual role to play in an organisation – that of a custodian and a catalyst, Arsakularatne said. As a result CFO will have diverse interactions, from the CEO, board, business operations and finance staff, customers, business partners, corporate buyers and sellers (external stakeholders), potential investors, stakeholders, bankers, regulators, etc.
“The role requires a CFO to be highly versatile. He has to play different and sometimes competing role. A CFO has to be an intelligent investor and advice board regarding investments. Have to be a good financial strategist and is expected to be a catalyst of change, a smart risk taker, be a corporate ambassador, the confidant of the CEO.”
Commenting on M&As, he noted that a key challenge here is post M&A integration. While some companies might want to acquire and run it independently, others would want it as part of a strategy. He also expressed surprised that73% of the responses from CFOs noted that there was no issue in the capital structure. “It is probably that we have gotten used to it and are tolerating the status quo. I think there is a lot to be improved.”