LOLC Dev. Finance emerges as most valuable finance company

• Price of highly illiquid and 0.11% public float-share continues to soar after last week’s 121% gain

LOLC Development Finance PLC (NIFL) has emerged as the most valuable finance company in terms of market capitalisation thanks to dizzy gains since early last week. 

Yesterday it gained by Rs. 41 or 25% to Rs. 205 with a mere 4,125 shares changing hands via 36 trades for Rs. 0.83 million. Its market capitalisation stood at Rs. 48.77 billion given 237.9 million shares in issue. 

Last week NIFL gained by 121% or Rs. 89.30 to close at Rs. 164 establishing a new 54-week high. Its lowest was Rs. 70. Around 40,853 shares changed hands via 509 trades for Rs. 4.9 million.

Its net asset per share is just Rs. 11.82 as at 31 March 2021.

In its meteoric rise, NIFL also overtook its part-owner Commercial Leasing and Finance PLC’s (CLC) market capitalisation of Rs. 40.8 billion. LB Finance’s market value was Rs. 38.8 billion. 

In the March 2021 quarter, the highest share price of NIFL was Rs. 133 and lowest was Rs. 44.50 before closing at Rs. 69.90.

NIFL was formerly BRAC Lanka Finance PLC, and some investors are willing to pay a hefty premium to lay their hands on its share largely on speculation. 

LOLC Holdings owns 55.55% stake and subsidiary CLC owns 44.34%. Public shareholding as at 31 March 2021 was 0.11% comprising 241 shareholders.

NIFL reported a Profit After Tax (PAT) of Rs. 155 million for the year ended 31 March 2021 (PAT for 2019/20, Rs.109 million), 42% increase compared to the previous financial year. This was mainly due to the increase in interest income as a result of the growth achieved in loan portfolio by Rs.1 billion, mainly from finance leases. Further, overhead costs also significantly dropped compared to the previous year. The company has provided additional provisions for impairments of loans considering the adverse economic outlook and COVID-19 pandemic situation and resulted in a higher provisioning and a Loss After Tax of Rs. 61 million for the last quarter.

In January this year, the parent LOLC announced plans to consolidate all its finance companies into a new listed entity and will hold all the key stakes, a move the company said was to attract large foreign investors. 

For this purpose, LOLC Holdings PLC (LOLC) has designated a fully owned subsidiary, LOLC Ceylon Holdings Ltd. (LOLC Ceylon), to operate as a platform and plans to list LOLC Ceylon in the Colombo Stock Exchange. 

Post listing of LOLC Ceylon, the shares owned by LOLC in LOLC Finance PLC (LOFC) amounting to 44.79%, shares owned in Commercial Leasing and Finance PLC (CLC) amounting to 98.92%, and the shares owned in LOLC Development Finance PLC (NIFL) amounting to 55.55%, are to be transferred to LOLC Ceylon. 

As this is an internal group restructuring, the transaction will be executed at the prevailing market prices at the date of the transfer, as an off-the-floor transaction. 

The market responded to the move positively. On 12 January 2021 with the announcement CLC share price gained by 24% or Rs. 1.10 to Rs. 5.60, LOFC moved up 16% or 80 cents to Rs. 5.70. LOLC Development Finance saw its share price gain by 14% or Rs. 6.70 to Rs. 55.10. Parent LOLC moved up 3.5% or Rs. 5.75 to Rs. 165.75.