Union Bank Plans a Country Fund through NAMAL. Possibility of Listing is Singapore Explored

13th February 2011, www.sundaytimes.lk

Union Bank Ltd (UBL), which scored a double whammy this week by announcing its intention to go public by March end while acquiring a majority stake in Distilleries Company subsidiary, National Asset Management Ltd (NAMAL) is planning a country fund, UBL officials said.

“We will be creating a country fund for Sri Lanka and other emerging markets through NAMAL,” Alex Lovell, Deputy Chairman UBL and a high networth investor told the Business Times on the sidelines of UBL’s Initial Public Offering launch.

He added that NAMAL will shortly apply for regulatory sanctions pertaining to this fund. He said that the fund is still being structured and that they might explore twin listings here and abroad.

“We are exploring the possibility of listing this fund in a stable, highly regulated and a safe place such as Singapore,” he said. Distilleries subsidiary, Milford Holdings Pvt Ltd is selling a 70 % majority stake in pioneering unit trust firm, NAMAL for nearly Rs 455 million to two parties - UBL and Ennid Capital, the company in a statement said on Thursday.

It said a share sale agreement for UBL to purchase 51%, while Ennid Capital Pvt Ltd will buy 19% in NAMAL. Ennid Capital is Sri Lankan Jeweller, B.P. de Silva’s investment arm.

UBL IPO is slated to raise Rs. 375 million. The bank is offering 15 million shares at Rs. 25 in three categories of 1.5 million for employees, 2.25 million for customers that have maintained accounts for a minimum of 6 months as at 31 January 2011 and 11.25 million shares for investors.

Through this IPO UBL plans to carry out branch expansion and mobilisation of low cost funds, expand while leveraging of e-channels, focus on priority sectors in the economy for credit, and carry out trade financing, expand their capital market operationsand share trading, introduce banking for the bottom of the pyramid (bare-foot banking), implementation of a core banking system to increase efficiency and resource utilization and risk management system for prudent credit pricing and monitoring and focused recoveries.

Related Info :
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• Sri Lanka Unit Trusts Attract Rs1.5bn New Funds in First Ten Months of 2010

• Ceylon Tourism Fund to Benefit by Sector Boom. Banking & Tourism to Top Colombo Stock Exchange in 2011

Sri Lankan Born Dubai Based Investor Alexis Lovell Goes for a Green Field Project of $300mn on Tourism & Property

15th February 2011, www.lankabusinessonline.com

A Dubai based investor who entered Sri Lanka's capital markets at a time when the country was in the throes of a 30-year war says he has set his heights on a green field project.

Alexis Lovell, who works out of Dubai and is mainly involved in private equity, says he is planning a 300 million US dollar green field project with tourism and property among the top sectors that is being targeted.

"I am looking at a large project which will create economic value," Lovell told LBO.

"We have a team looking at various sectors."

Lovell says he had brought about 12 million US dollars of his own money into Sri Lanka and had helped mobilize another 150 million dollars from other investors.

He was associated with the purchase of Associated Motorways, a listed firm which had the agencies for Nissan and India's Maruti in Sri Lanka by Dubai's Al-Futtaim group for a 100 million dollars.

Al-Futtaim took the firm private. Last year the government cut taxes on car imports creating a boom for all importers.

Lovell started investing around 2007 when fighting between Tamil Tiger separatists and the government intensified. The 30-year war ended in 2009.

He says one reason for his interest in Sri Lanka is because he was born in the country.

"The other thing is that for private equity investors like us we look at opportunities. We go on the basis that the war will be over and something is going to happen. So during troubled times we invest and when the good time comes you exit.

"Some time ago somebody told me that when you hear the sound of bullets you must invest, and when you hear the smell of roses you must leave.

"Not that I am going to leave," he hastens to clarify. "I am a long term investor, I don’t want to take short term positions because it does not make sense. Our strategy is that you buy assets which are not doing well or are near distress state, and rehabilitate them."

Another firm he bought into in 2007 was Union Bank, a small bank that was troubled by bad loans and was put under the wing of Sri Lanka's Sampath Bank by the regulator. The bank is selling 15 percent of its equity and going public this month.

"The vision is basically you come in, you invest, re-organize management, re-organize the product, re-organize the capital then what you do is institutionalize it," says Lovell.

At Union Bank, Lovell brought in Malaysia based gaming and leisure group Genting, which he says has a balance sheet in excess of 30 billion dollars. The then undercapitalized Union Bank now has 4.6 billion rupees in capital which is above regulatory minimum.

"You must bring in a very strong investor with a strong balance sheet because we are all private individuals. So at one point you must institutionalize. That is what we did with Genting.

"Basically we were a set of entrepreneurs. We came, we changed the management, changed the products, looked at new segments. We institutionalized and are taking it public, which is the exit strategy for all the shareholders."

Under Sri Lanka's central bank rules, the Genting group which now has around 26 percent of the bank must cut its stake by 2015.

Lovell has himself bought shares in Union Bank from the start and also in later stages of capital injection.

"When I bring an investor I cannot tell him to come and put money into Sri Lanka. I have to tell him 'I am also volunteering to put money along with you'. Because for him it is relatively new, I must be convinced myself before I bring him."

Like Associated Motorways was a good fit for motor dealers Al-Futtaim, Lovell says Genting finds Union Bank, though small, a very useful foothold to track the economy and judge where to make further investments.

He says they are also used to working in highly regulated environments as the group comes under gaming regulatory regimes in the US, Singapore and Malaysia.

"The next project that I am hoping to do has to provide economic value to the country."

Lovell says there is "a lot of potential" in tourism though several new projects have been announced.