A company should go for a listing when it’s financially strong, then investors will have confidence in that organization, an official said on Tuesday.
A.M.A. Cader of Merchant Bank of Sri Lanka plc (MBSL) speaking at a seminar on the advantages of listing said that such a company should also offer its shares at a discount to make it attractive to investors, and for greater acceptance, have its accounts audited by a multinational audit firm.
Among MBSL’s several commercial roles is also to help companies to list in the Colombo Stock Exchange.
He said that among the deficiencies of unlisted companies is that they have closely held management structures, thereby being a disadvantage for their continuity, expansion and survival. Such companies may also find it difficult to be competitive in the backdrop of globalization.
Other deficiencies in privately owned companies are informal management structure, low skilled second line management and preference of ownership over growth. Therefore the advantage in going public is access to public funds, enhancement of corporate image, increased liquidity, visibility of market pricing thereby making it easier to divest and listed company shares being strong collateral for borrowing, said Cader.
Ramesh Schaffter, a director of Janashakthi plc, a family controlled insurance company said that one advantage of listing is that one could obtain liquidity from banks in lieu of shares. “Banks don’t accept private company shares,” he said.
Schaffter said that their’s was the only company to list in 2008, with no listing taking place in the preceding year. That was the period when the war was on in the island. Their share issue was four times over-subscribed. The offer was for 33 million ordinary shares at Rs. 12 a share.
LAUGFS plc Chairman W. K.H. Wegapitiya in his speech said that LPG may be the only business in the country where profit is guaranteed by a formula. One of LAUGFS’ key businesses is the sale of LPG. He said that their share issue which opened last year was oversubscribed 25 times. They raised Rs. 2. 5 billion from this issue and settled some of their high cost bank borrowings. The Group makes an over Rs. 15 billion annual turnover.
Dr. Ravi Liyanage of Raigam Group said that they raised Rs. 200 million from their IPO which was invested in their salterns.
Pofessor Lal Chandrasekera, director/General Manager Nawaloka Hospitals plc said that hospitals are a costly business with investing in human resource development being a need. He said that a CT Scanner is Rs. 80 million, an MRI Scanner (Rs. 225 million) and an ICU bed (Rs. six million). Nawaloka has over 10,000 shareholders.
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