NSB Head gives quit notice
National Savings Bank (NSB) Chairman Pradeep Kariyawasam yesterday tendered his resignation amidst mounting pressure for the same from Opposition and trade unions over the ill-fated decision to invest in The Finance Company Plc (TFC).
Kariyawasam, who only completed two years as NSB Chief last week, had sent his resignation to President Mahinda Rajapaksa, who is also Minister of Finance and his Secretary Dr. P.B. Jayasundera.
Whilst the President is currently in Qatar, it couldn’t be confirmed whether the Finance Ministry had accepted the resignation or not and whether the resignation had indicated if it was with immediate effect.
Despite yesterday’s move and recent flak, the Triple A-rated and Rs. 466 billion asset-rich savings giant’s business operations are continuing as normal.
Kariyawasam handing in his resignation also comes amidst Dr. Jayasundera on the instructions of the President seeking a report on the TFC deal from Treasury nominee on the NSB Board, Deputy Secretary to the Treasury P.A. Abeysekera.
Last week trade unions of NSB picketed outside the headquarters in Colombo 3, demanding the resignation of the Chairman, whilst the main Opposition UNP was the first to call for the same soon after suspecting irregularities following the 27 April deal where NSB bought a 13% stake for Rs. 390 million (7.8 million shares at Rs. 50 each above Rs. 20 from the market price) from a consortium of buyers.
Friends of Kariyawasam claimed he was free of any wrongdoing. They maintained that the investment into TFC had been on for several months and well-documented internally, including presentations to NSB, Board discussions and approval.
The Sub Committee on Corporate Lending and Equity Investments at NSB was engaged in the process and CEO Hennayake Bandara kept informed as well.
Supportive comments on Kariyawasam were amidst market talk that he was only carrying out instructions to go ahead with the deal.
During a previous statement explaining its decision to withdraw from the TFC deal, NSB admitted that it did look at investing in TFC during the latter’s new issuance of voting shares in January last year.
However, insiders alleged proper procedure wasn’t followed whilst last month’s decision to invest was bulldozed by the Chairman, who is Non-Executive. There has been market talk of rifts between the Chairman and CEO as well.
Analysts said the report called for by Dr. Jayasundera from Treasury nominee on NSB Board would clear the air if made public. The Treasury Secretary earlier told Daily FT that it was answerable to Parliament, hence the need to ensure whether NSB had pursued proper procedure in arriving at the decision to invest in TFC.
Due to Presidential intervention, NSB was told not to pay for the transaction as well as withdraw, widely believed as an unprecedented move of backtracking from a commercial transaction.
The contentious deal however was reversed last Friday with the Securities and Exchange (SEC) resolving the stalemate after written requests from all parties to the deal for a resolution. NSB transferred the shares back to sellers who in turn settled Sampath Bank, which had originally paid for sellers without ensuring funds from NSB were in place for the purchase.
Pressure on Kariyawasam to quit was also fuelled by the fact that his wife is the Chief Justice, though both are independent professionals.
Kariyawasam was appointed Chairman of NSB on 14 May 2010. He was also the former Chairman of Sri Lanka Insurance Corporation Ltd., subsequent to it being vested with the Government in June 2009, after a six-year period of privatisation. Kariyawasam also served on the Boards of Seylan Bank and Lanka Hospitals (formerly known as Apollo Hospitals).
Kariyawasam is a senior corporate figure with over 30 years of experience in the private sector, of which over 15 years have been at CEO/Director/GM levels at leading private sector conglomerates, including United Motors Lanka Plc, Browns Group of Companies, etc.
His extensive experience in marketing and sales management encompasses a cross section of large corporate conglomerates. Kariyawasam has also functioned as a respected consultant in business management and project management, both in the private sector as well as in the State sector. He holds a Certificate of Marketing from CIM (UK).
Though some analysts defended the Rs. 20 premium (as opposed to trading price) for a 13% stake coupled with three board seats, questions were raised because TFC currently suffers negative net worth of Rs. 23 per share whilst has carried forward losses worth Rs. 9 billion, most of which linked to times when it was under the Ceylinco Group.
The other criticism was over the composition of the consortium of sellers, which included Dinal Wijemanne, Director of TFC, as well as CEO of NSB’s buying broker as well as majority of sellers Taprobane Securities.
The broking firm’s Managing Director Ajith Devasurendra is also a Director on the TFC Board. Wijemanne sold 2.9 million shares for Rs. 145 million. Another popular name in the consortium was electronic media fame Rayynor Silva, who also sold 2.9 million shares for Rs. 145 million whilst another TFC Board member, Aruna Fernando, also sold 50,000 shares for Rs. 2.2 million.
These Directors to TFC were handpicked by Central Bank Governor Nivard Cabraal, who otherwise has been either partly or fully credited for resurrecting some of the troubled Ceylinco Group companies as well as Seylan Bank.
The TFC Chairman and CEO welcomed the NSB entry saying it was a win-win partnership. While TFC, the oldest and largest finance company, has seen its fortunes improving of late including Rs. 1 billion in new deposits in April, needs fresh infusion of capital to be more progressive.
Via a planned 15 to 20% stake, NSB, which was planning to invest Rs. 200 million during TFC’s share issue in early last year, saw a strategic fit in and synergies via TFC though the savings giant under its Act is precluded from pursing direct diversification.
However unions, the Opposition as well as financial services analysts saw danger or irregularities in the deal as well the strategy adopted. The SEC is also conducting its own investigation into the transaction.