Former Industrial Finance depositors seek redress over share conversion losses

Thursday, 18 June 2026 00:00 - - {{hitsCtrl.values.hits}}

A group of former depositors of Industrial Finance Ltd., now operating as Lanka Credit and Business Finance PLC (LCBF), has renewed calls for regulatory intervention, claiming they suffered substantial losses after deposits converted into shares during a restructuring exercise were subsequently diluted and listed at significantly lower values.

The depositors, who invested in fixed deposits before the collapse of Industrial Finance Ltd., contend that a Central Bank-backed restructuring implemented in 2011 and 2012 required them to convert part of their deposits into equity. They claim that while those shares were originally issued at a value of Rs. 10 each, subsequent corporate actions and the eventual stock market listing eroded much of that value.

According to the 2011/12 Annual Report of then City Finance Corporation Ltd., formerly Industrial Finance Ltd, 50% of deposit liabilities were converted into new fixed deposits while the remaining 50%, together with unpaid interest, was converted into non-voting shares as part of a restructuring program approved by the Monetary Board of the Central Bank.

The depositors argue that the value of those holdings was severely diminished when the company undertook a private placement and share consolidation ahead of its listing on the Colombo Stock Exchange in 2021.

Documents submitted by the depositors show that during an Extraordinary General Meeting in March 2021, representatives of the depositors objected to a proposal to issue 741.4 million new shares at 40 cents each, arguing that the original shares issued to depositors reflected deposit values converted at Rs. 10 per share.

Minutes of the meeting show a representative of the Depositors’ Association stating that members would incur losses under the proposed structure because their shares had been issued against deposits at Rs. 10 per share.

LCBF, however, has rejected suggestions that shareholders were treated unfairly. In a 2023 response to concerns raised by depositors, the company said it acquired a 72.39% stake in the then City Finance Corporation in 2018 with approval from the Monetary Board and that the company had a negative net asset value per share of Rs. 0.76 at the time. It said subsequent capital infusions of nearly Rs. 2 billion, profit retention and a reduction of stated capital improved the net asset value to a positive Rs. 0.40 per share by the time of listing.

The company further stated that all non-voting shares were converted into voting shares following approval from both shareholders and the Central Bank at an Extraordinary General Meeting held in September 2020.

The dispute highlights the lingering grievances of depositors affected by the collapse and restructuring of several finance companies more than a decade ago, with former Industrial Finance depositors now seeking fresh discussions with regulators and company management regarding compensation and the treatment of their equity holdings.