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Siyapatha Finance performs successfully despite challenging financial environment

The 2019 financial year was characterized by a subdued overall economic growth as a result of several challenges faced by the country as well as worldwide. The Non-Banking Financial Institutions (NBFI) sector recorded a negative credit growth that mirrored the macro economic conditions that prevailed at the time.

Regardless of the fragile performance of the sector, Siyapatha Finance recorded a robust asset growth of 13%, coming close to the projection for the year despite the unfavourable circumstances of the time. The company’s profit before taxes grew by 7%, whereas the topline saw an increase of 13%, ending the year with equanimity. Profit after tax for the second half of the year reflected a growth of 164% over the first six months of the year.

The successful performance was achieved as a result of shifting the focus on to two key market segments in which Siyapatha Finance holds high levels of competency. Consequently, Micro Leasing was added to the core business areas of Leasing and Gold Loans. Micro Leasing caters to a segment that has high potential and represents a majority of enterprises in the country, including small and medium businesses. Siyapatha Finance has recognized the importance of catering to this segment by funding and uplifting them, while ensuring that depositors are secured.

The assurance of trust that customers of Siyapatha Finance have experienced since inception was reflected by the successful mobilization of Rs. 1.5 billion through a listed subordinated debenture issue. The rated, unsecured subordinated, five-year debenture issue had an initial tranche of Rs. 1 billion with an option to raise by Rs. 500 million, in the event of an oversubscription of the initial tranche.

Maintaining high standards of governance and compliance with all statutory governance standards are paramount to financial institutes. In 2019 Siyapatha Finance strengthened the Risk and Compliance functions by forming two separate divisions for each function. Furthermore, the company has not recorded any departures from provisions of the Finance Companies Direction No. 3 of 2008 and subsequent amendments on Corporate Governance issued by the Central Bank of Sri Lanka or the Colombo Stock Exchange. Siyapatha Finance voluntarily adopted The Code of Best Practices on Corporate Governance 2013 issued jointly by the Securities and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants of Sri Lanka.

Siyapatha Finance has also improved its risk management and credit evaluation processes while maintaining the targeted credit growth and primary objectives of business development. As such, many methodologies were introduced to assist risk management, evaluate risk profile, estimate potential losses, propose remedial actions, periodically stress test, and ensure sufficiency of buffers.
Mr. Sumith Cumaranatunga - Chairman (Independent / Non-Executive Director) Siyapatha Finance PLC
 “The Siyapatha Finance Team, including the Board of Directors and the Corporate Management spearheaded by the Managing Director, took a long and hard look at the business and came up with a clear strategy that would secure the investments of our customers while ensuring that all stakeholders reap benefits for their commitments. Together we clearly identified the strengths of our operations and built sustainable measures into the system. I am personally proud of the overall performance of the whole team”, stated Sumith Cumaranatunga, Chairman of Siyapatha Finance.

Ensuring sustainability, Siyapatha Finance has also focused on its core strength of serving the targeted segments with a range of financial solutions. This has enabled the company to continuously maintain the value of its services. Siyapatha Finance executes a strategy that enables financial inclusivity of targeted customer groups, including small and medium clientele, through finance Leasing, Gold financing and deposit mobilization. This is achieved by geographical expansion and market penetration, along with a diverse offering of Leasing and Gold Loan products. The use of IT infrastructure and presence on digital platforms will be other avenues that are to be explored in order to strengthen market share. Improved effectiveness and faster response time will be prioritized to ensure a healthy course of progress for the customers and all other stakeholders.

The challenge for 2020 will be to manage in an economy striving to recover during the rest of the year. Despite the hurdles and unfavourable circumstances in the industry as well as the economy in general, Siyapatha Finance has distinguished itself by posting an impressive performance in the 2019 financial year and looks forward to sustaining the spirit of accomplishment in the future.

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Colombo port resumes normal operations

Operations at the Colombo Port are now returning to normal, despite a few delays in container clearance.

The container backlog at the Colombo Port caused by the Covid 19 closure has now been cleared and the Port has already started the usual operations.

All Ceylon Container Transport Employees’ Union (ACCTEU) General Secretary B.I. Abdeen has explained that although the containers stuck due to the Covid 19 have been cleared, the usual delay is still there when releasing the containers.
“We have been talking about this issue for years but the problem remains the same. This delay is not because of Covid 19,” Abdeen has added.

The Colombo Port is packed with over 40,000 containers after the Covid 19 crisis disrupted economic activities in April, but three container terminals at the Port have been operating throughout the crisis at full capacity.

However, vessel calls have started to decrease.

With lockdown restrictions being eased by the Government on 11 May, the shipyard, which had been operating at a 20-30% capacity, providing only essential repair services and completing vessels undergoing repairs in the yard, is now returning to normal levels.

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HNB launches Rs. 5 Bn in SME relief to support post-COVID recovery

In an effort to finance a grassroots revival of the Sri Lankan economy in the wake of the COVID-19 pandemic, HNB PLC announced the launch of a Rs. 5 billion relief fund which will be used to provide working capital support to the bank’s substantial portfolio of Small and Medium Enterprise (SME) customers.

“Following on the action taken by Government and public health officials to curtail the spread of COVID-19 in Sri Lanka, a new sense of normalcy is gradually being restored. Moving forward, our next major challenge is to similarly contain the damage inflicted on the health of our nation’s economy from nearly three months of relative stagnation. HNB is fully committed to partner with all stakeholders in this endeavour,” HNB Managing Director/CEO, Jonathan Alles stated. hnb

The HNB COVID recovery fund will be leveraged to bolster assistance to the SME sector by complementing the Central Bank of Sri Lanka (CBSL) supported Saubagya Covid -19 Refinance Loan Scheme.

Hence applicants who are unable to secure Government funded loans at 4% p.a. will be given the option of securing a working capital loan via the HNB COVID relief fund at a concessionary interest rate of just 8% p.a. for a maximum period of 24 months.

In this manner, HNB aims to utilise its own internally generated funds to support Government objectives of ensuring that as many viable SMEs are provided priority access to funding to support them through the disruptions caused by the COVID pandemic.

“Given our pioneering role and vast client network in the SME space, HNB is ideally positioned to assist this vital sector – which collectively accounts for nearly half of all employment in Sri Lanka. Many of these businesses are facing extremely constrained cash flows, but with the right support, they still have the potential to recover and eventually thrive.

“As a bank we understand that these are difficult times, and so we are doing everything we can to be flexible with repayments and assist customers in any way we can to get through this uncertain and volatile period. We remain confident that the launch of this fund - which operates independently from the Saubagya COVID loan scheme - will help catalyse an organic grassroots revitalisation of the Sri Lankan economy in the months to come,” HNB DGM - Retail and SME Banking, Sanjay Wijemanne explained.

As the first private sector commercial bank to enter the SME space, HNB has a long history of supporting SME development in Sri Lanka. Over the past year, the bank took further extraordinary measures to assist SME clients, initially through the provision of loan moratoriums and working capital loans to businesses negatively impacted by the Easter Attacks of 2019.

Additionally, the bank also seeks to actively align its operations with national priorities. Prior to the current COVID-related stimulus packages, HNB was intensively engaged in promoting Credit Support to Accelerate Economic Growth to support SMEs engaged in manufacturing, services, agriculture and related value-added businesses that were facing challenges stemming from a subdued macroeconomic environment.

This support was further extended to SME clients following the onset of the COVID-19 pandemic. At present, HNB has facilitated over 2,500 clients to apply for relief under the CBSL Saubagya working capital loan scheme, in addition to providing over 75,000 individuals and enterprises with debt moratoriums.

Serving as a partner in progress to the entire nation, HNB also maintains regular engagement with SME clients in order to proactively identify instances in which customers are impacted by natural disasters. In such instances, the bank will regularly approach clients in order to discuss their difficulties and extend relief in the form of debt moratoriums, assistance with insurance claims, concessions or delayed payments in addition to offering lending facilities to help restart businesses impacted by natural disasters.

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New business of SLIC expected to be subdued

New business generation in the life insurance business of Sri Lanka Insurance Corporation (SLIC) is expected to be subdued over the near term due to the decline in economic activity caused by the COVID-19 pandemic, according to Fitch Ratings.

Fitch also said, “As most insurers predominantly use agency networks that rely on human interaction for distribution. In addition, we expect non-life business growth to slow in light of the government’s temporary restriction on the import of motor vehicles to control currency depreciation.”

Fitch expects the potential pressure on SLIC's earnings from the slowdown in premiums and softer investment yields to be somewhat mitigated by lower claims from motor insurance lines due to fewer traffic accidents following restrictions on travel to contain the spread of the coronavirus. SLIC has consistently maintained its non-life combined ratio below 100% (2019: 95%) for the previous five years, buoyed by its scale advantages and prudent underwriting practices.

Fitch has affirmed the Insurer Financial Strength (IFS) Rating of SLIC at ‘B’. The outlook is negative. The agency has simultaneously affirmed SLIC’s National IFS Rating at ‘AAA(lka)’ with a Stable outlook.

Fitch says that SLIC’s ratings reflect its ‘Favourable’ business profile, and capital position and financial performance that are better than that of the industry. These strengths are partially offset by its high exposure to sovereign-related investments, which caps its investment and asset risk score on the international rating scale at ‘ccc+’ under Fitch’s credit-factor scoring guidelines.

The Negative outlook on SLIC’s international IFS Rating reflects the credit rating agency’s expectations of a further increase in the insurer’s investment-related risks, which are heightened in the international rating scale because of its sizeable exposure to assets linked to the Sri Lankan sovereign (B-/Negative).

Fitch assesses SLIC’s business profile as Favourable’ compared with other Sri Lankan insurance companies due to its leading business franchise, diversified participation and stable business lines across life and non-life insurance sectors, and its large domestic operating scale.

In light of this ranking, Fitch scores SLIC’s business profile at ‘b+’ under its credit-factor scoring guidelines on the international rating scale. SLIC is Sri Lanka’s second largest life insurer and third largest non-life insurer based on gross written premiums.

SLIC’s risk-based capital ratios of 434% for its life and 208% for its non-life segments, which measure its capital position, were well above the industry average and the 120% regulatory minimum.

Fitch expects the insurer’s sufficient capital buffers, strengthened partly by its large unallocated participating surpluses, to somewhat mitigate the impact from any potential investment losses stemming from volatile financial markets as a result of the coronavirus pandemic.

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Insee Cement to ramp up production at Galle grinding plant

Siam City Cement subsidiary Insee Cement says it is ramping up production at its 0.4Mt/yr Galle grinding plant. The unit in Southern Province was opened in 2018 and along with Insee’s Puttalam integrated plant, will have the production capacity to serve 100% of domestic demand.
The producer added that production and supply of its products had returned to normal following disruption caused by COVID-19 lockdown measures.

Insee Cement sales, marketing and innovation executive vice president Jan Kunigk said, “Our contribution to uplifting the nation’s economy is of immense value in rebuilding Sri Lanka during post-pandemic recovery. Insee Cement’s ability to efficiently deliver our full capacity of high-quality cement needed by individual house builders and concrete business partners has always been ensured.”

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Central Bank suspends business of NatWealth Securities Ltd

The Monetary Board of the Central Bank of Sri Lanka (CBSL) at its meeting held on 28.05.2020, having considered the continuous failure to comply with the directions applicable to NatWealth Securities Limited (NWSL) as a Primary Dealer, acting in terms of the Regulations made under the Registered Stocks and Securities Ordinance and the Local Treasury Bills Ordinance, has decided to suspend NWSL from carrying on the business and activities of a Primary Dealer.
Accordingly, NatWealth Securities Limited will be suspended for a period of six months with effect from 01.06.2020.

The CBSL announced today that they will take "necessary measures to ensure that this regulatory action does not have a disruptive impact on the Government Securities market" adding that action will also be taken to facilitate the handling of the interests of the customers and counterparties of NWSL in an orderly manner.

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HCL commences operations; looks to create 1,500 jobs

Global IT giant HCL Technologies on Tuesday said it has commenced operations in Sri Lanka, and plans to create over 1,500 local employment opportunities in the next 18 months.

HCL Technologies plans to create over 1,500 new local employment opportunities for freshers and experienced professionals within the first 18 months of kick-starting its operations from its office in Colombo, according to a statement.

A key part of HCL's business and development strategy in Sri Lanka will be to use local talent pool in Sri Lanka will be to use local talent pool in the country for global assignments, it added.

"I am hopeful HCL will be able to create employment opportunities for the people of the country, and people of Sri Lanka will have access to the global work environment right in their own country. We are excited about this and I am hopeful Sri Lanka will soon emerge as an IT destination for more companies," Susantha Ratnayake, chairman of the Board of Investment (BOI) of Sri Lanka, said.

Srimathi Shivashankar, corporate vice-president of HCL Technologies, said the company is keen on hiring and engaging with the highly skilled and talented people of Sri Lanka.

"Our delivery centre in Sri Lanka will play an important role to serve our Fortune 500 and Global 2000 clients and partners throughout the globe," Shivashankar added.

HCL had joined hands with the BOI of Sri Lanka in February this year to launch its local entity -- HCL Technologies Lanka (Private) Limited -- and set up its first delivery centre in the region.

Through this entity, HCL will provide services to global clients in the areas of applications and system integration services and infrastructure services.

HCL will also implement its Work Integrated Education Program to foster growth by actively cooperating with local information and communication technology and engineering institutions to develop and train the local talent pool.

For freshers, HCL will focus on hiring A Level, Higher National Diploma students through HCL ESOFT Training & Hiring Program, the statement said.

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Aitken Spence records a profit of Rs 4.2 billion for 2019-2020

Evan after experiencing two black swan events with their distinctive and severe impacts within the space of one year, Aitken Spence PLC remained resilient despite these challenges due to the Group’s diversified business portfolio and strategic direction.

The Group’s financial performance for the twelve months ending 31st March 2020 recorded a year-on-year profit-before-tax of Rs. 4.2 billion compared Rs. 7.3 billion last year.

Despite considerable economic headwinds the organisation’s agile strategy was reflected in the earnings from the overseas businesses that contributed 39% compared to 43% last year. This underlined the exceptional relationships that have been built with global industry players across the key sectors. The Group’s businesses from the domestic market derived 61% earnings of the Group’s PBT for 2019/2020 compared to 57% in the previous year.

The total revenue of the Group ending 31st March 2020 was Rs. 53.5 billion, a 4% drop from the previous year, primarily due to a reduction of revenue from the Tourism sector which was affected by the significant impacts mentioned above. However, the drop was compensated by the commencement of the operations during the third quarter of the year of Heritance Aarah, the flagship hotel in the Maldives.

The total assets of the Group increased by 14% to Rs. 140 billion. The Group invested Rs. 10 billion in capital expenditure across many sectors with the highest investment incurred in the power generation segment to fund the construction of the pioneering waste to energy power project, the first of its kind in Sri Lanka. This reflects the organisation’s confidence in its future earnings growth capacity.

The Group’s expansion increased to 9 countries as the Maritime & Freight Logistics sector re-established its presence in South Africa whilst the Tourism sector commenced operations in Myanmar during the year.

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Etihad to resume regular services from Sri Lanka

Starting from June 20, Etihad will resume regular services from Sri Lanka to key cities on its global network via Abu Dhabi.

Flight EY265 will depart Colombo on Thursdays and Saturdays at 0135 hours, landing in Abu Dhabi at 0430 (local time). From Abu Dhabi, the service connects to Barcelona and Zurich on a weekly basis, and to Dublin, Frankfurt, Geneva, London, Madrid, Milan and Paris twice weekly.

 In terms of the safety measures on board, Etihad has implemented an extensive sanitisation and safety programme that covers high standards of hygiene in areas including catering, aircraft and cabin deep-cleaning, check-in, health screening, boarding, crew interaction, meal service, disembarkation and ground transportation, among others.
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Mastercard appoints Rajesh Mani as new country manager

Mastercard, a global technology company in the payments industry, has announced the appointment of Rajesh Mani as the new Country Manager for Sri Lanka & Maldives. Rajesh, who took office earlier in March, will bring over two decades of extensive background in the payments and fintech sectors.

“I’m very confident that Rajesh’s multi-faceted payments background will be of great value to our customers, partners and the team in Sri Lanka & Maldives. As these markets continue to develop and evolve rapidly, Rajesh is very well placed to support our partners towards building a vibrant digital ecosystem in these geographies.,” Mastercard's Chief Operating Officer for South Asia, Vikas Varma said.

In his last position in Singapore, Rajesh led Mastercard’s delivery of domestic payment system infrastructure enhancements in Indonesia, which won the global CEO award in 2018. Further, he also actively led a number of Mastercard’s high impact digital partnerships with key digital clients in Southeast Asia, including Grab, Gojek and Shopee.

“I am honored to have this opportunity, and I’m looking forward to working with the government, all of our customers, partners and stakeholders to support Sri Lanka & Maldives’ vison of digital transformation, financial inclusion for citizens and their overall evolution towards cashless economies,” said Rajesh Mani.

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Relocation and expansion for ETAL in SL

ETAL Group, the manufacturer of magnetic components says that it is relocating and expanding its Sri Lankan manufacturing facility as a response to the increased demand and growth experienced by the company.

The new site in Piliyandala commenced operations in the first quarter of 2020, following the transfer of production from its Rathmalana facility. The new factory provides room for further expansion, with no disruption to customer service, and offers an alternative source for volume production of magnetic components outside of China. As with all ETAL Group manufacturing facilities, following the relocation, ETAL Group Pvt Ltd remains fully certified to ISO 9001, 14001 and 45001.

“Our exciting new facility provides us with the infrastructure to produce higher volumes and the space to add to our existing capabilities going forward. Its opening is a just reward for our dedicated team of employees, many of whom have been with us since the conception of the company. Currently we employ 250 workers in Sri Lanka and have the additional space required to more than double this, meeting growing demand for our consistently high-quality products,” says Scott Robinson, General Manager of ETAL Group Pvt Ltd, in a press release.

The new site in Piliyandala is located in a 5600 square metre compound with 3400 square metres of production floor area and a modular internal infrastructure that allows for flexible, efficient and cost-effective manufacturing.

Capabilities at the new factory include a computer aided component design suite, a mechanical workshop, automatic fine wire winding (linear and toroidal), manual winding, NC and manual soldering, planar assembly, vacuum encapsulation, vacuum varnish impregnation, ferrite core grinding, reflow and electrical verification to fully cover the manufacturing requirements of a wide range of standard and custom designed inductive components and assemblies.

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Fitch revises outlook on People's Leasing to negative

Fitch Ratings has revised the Outlook on Sri Lanka-based People's Leasing & Finance PLC's (PLC) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to Negative, from Stable, and has affirmed the ratings at 'B-'.

This follows the 24 April 2020 downgrade of Sri Lanka's sovereign rating to 'B-', from 'B', with a Negative Outlook to reflect the impact of the escalating coronavirus pandemic on the economy.

Fitch forecasts Sri Lanka's economy to contract by 1.0% in 2020, from 2.3% growth in 2019, due to the impact of the coronavirus pandemic.

"Our base-case scenario assumes that any economic recovery later this year will be gradual, with limited growth prospects for the non-bank financial institutions (NBFI) sector through 2020 and 2021. We expect NBFIs' financial profiles to come under strain from a more challenging operating environment, and for their key credit metrics to be weaker than our previous expectations, notwithstanding regulatory relief," Fitch Ratings said.

The Negative Outlook reflects the increased risk to the company's financial profile from the pandemic and our assessment that the sovereign's weakened credit profile could constrain PLC's rating if it deteriorates further.

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