IPOs Raise Over Rs 5bn in 2010 in Sri Lanka. CSE Market Cap Up by 105.84pct, ASPI Up by 99.38pct

29th December 2010, www.island.lk

With bank credit to the private sector slow to pick up during the year, Sri Lankan companies have raised finances for expansion and retirement of debt amounting to over Rs. 5.3 billion through initial public offerings (IPOs) in 2010.

Around 10 companies have listed on the Colombo Stock Exchange this year; raising more than Rs. 5,342.9 million.

Laugfs Gas IPO for Rs. 2.5 billion was the highest public offering while Ceylon Tea Brokers’ IPO for Rs. 28 million was the lowest.

Singer Finance’s IPO for Rs. 400 million established a record after it was oversubscribed by 135 times a few weeks ago. The record was previously held by Odel PLC, where its Rs. 250.5 million IPO was 63.8 times oversubscribed.

Apart from these IPOs, two financial institutions introduced their equity to the stock exchange. Sinhaputhra Finance made an equity introduction of 6,295,893 voting shares at Rs. 75 each and Citizens Development Bank introduced over 39.6 million shares at Rs. 15 each.

The Colombo Stock Exchange is one of the better performing exchanges in the global economy which is still in uncertainty.

Market capitalisation grew by 105.84 percent to Rs. 2,168.8 billion as at December 24, 2010 from Rs. 1053.6 billion a year ago.

During this period, the All Share Price Index grew by 99.38 percent to 6,512 points from 3,266 a year ago. The Milanka Price Index of more liquid stocks grew by 86.27 percent from 3,744 points a year ago to 6,974.

The government announced several proposals in the Budget 2011 to uplift the country’s capital market.

In order to encourage new listings in the Colombo Stock Exchange the government proposes to recognize expenditure related to initial public offerings (IPOs) as deductible expenditure for tax purposes subject to 1 percent of the value of the IPO.

Withholding tax on corporate debt securities will be treated on par with government securities.

Re-insurance commissions and claims from VAT would be exempted from Withholding tax to reduce the transaction cost of insurance. In order to promote unit trusts to mobilize savings the government proposes to exempt them from the Economic Service Charge.

Exchange control restrictions on foreigners and foreign funds investing in unit trusts will also be exempted.

Income derived by unit trusts from investments in listed debentures and equity is proposed to be exempted from income tax.

The government also proposed to increase the Share Transaction Levy from 0.2 percent to 0.3 percent, in the absence of a capital gains tax in the country.