Capital Alliance buys finance company from PMB for Rs. 430 m

Wednesday, 30 March 2011 00:46 -     - {{hitsCtrl.values.hits}}

Capital Alliance Holdings Ltd. will be entering into the registered finance company business with the acquisition of a subsidiary of People’s Merchant Bank (PMB) for Rs. 430 million.

The decision to divest the subsidiary People’s Merchant Finance Company Ltd. (formerly Silvereen Finance Company) was made by PMB Board on Monday. People’s Bank owns 26% stake in PMB along with 19.7% by LOLC and 13% by People’s Leasing

PMB paid Rs. 287 million for the purchase of Silvereen in the 2009/10 financial year as a strategic move since the venture would pave way for it to mobilise public deposits for growth of lending activities. Later on, a move to amalgamate the finance company with PMB was mooted but put on hold.

In January this year, following a directive given by the Central Bank, the PMB Board decided not to proceed with the decision to take over the assets and liabilities of People’s Merchant Finance Company Ltd. (PMF).

Controlled by financial market specialist Ajith Fernando, Capital Alliance Group is engaged primary dealership of government securities, stock broking and tea broking.

The company was incorporated 29 years ago and is a Central Bank of Sri Lanka registered finance company based in Kandy.

The operations are carried out only from its head office in Kandy. With access to public deposits, group finance cost could be brought down substantially in the future. The finance company’s main line of businesses includes leasing, hire purchase, trade finance and deposit mobilisation.

The total assets of the company as at end 2009/10 were around Rs. 300 million. Leasing and hire purchase advances have reduced to Rs. 142 million at FY 2009/10 end from Rs. 207 million at end of FY 2008/09, a reduction of 31%.

Deposits of the company amounted to Rs. 63 million, down from Rs. 79 million at end of FY 2008/09 with low business operations. It had a profit before tax of Rs. 8.7 million for the financial year ended 31 March 2010. However, due to high income tax charge of Rs. 5.5 million, profit after tax amounted to Rs. 3.1 million.