The meeting last week between the directors of the Securities and Exchange Commission (SEC) and the Colombo Stock Exchange (CSE) was described by participants as a ``very good’’ with some holding the view that it was better than the previous encounter with the president.
"Dr. Jayasundera was very clear that it was necessary to be flexible and revive the market,’’ one participant said.
"CSE Chairman Krishan Balendra made the point that while there was a net foreign outflow in 2010 and 2011 (when the Colombo market boomed), there has been an inflow of Rs. 24 billion up to now this year without taking into account the money that’s coming in with the agreement with Odel executed,’’ he said.
Analysts believe that with the steep correction in recent weeks, pricing appear attractive particularly for long term investors with foreign investors having a further advantage of the rupee depreciation. But they were not ready to take a call on whether Friday’s turnaround was a clear signal that the worst days are past.
"We must wait and see,’’ they said.
Dr. Jayasundera had told the SEC that all ongoing investigations should be quickly brought to a conclusion and had advised that it must always be in mind that we are yet an emerging market and the best international practices cannot be imposed overnight in such a context.
The share sale and purchase agreement between the major shareholders of Odel and Parkson Retail Asia Ltd. under which Parkson will take 41.82% of the Lankan company from its founder, Otara Gunawardene and her brothers, Ajith and Ruchi, at slightly over Rs. 1.42 billion was described by analysts as a strong signal on the country’s investment potential.
Otara, while selling down her controlling stake will retain 27.88% of the company and continue to be its CEO. Also, there will be a one for one rights priced at Rs. 20 per share following the transfer of the shares that will infuse nearly Rs. 2.9 billion into the company for its ``future investment in retail spaces.’’
The deal will trigger a mandatory offer which the principal shareholders will not take. They have undertaken to take up their full rights entitlements.
A well informed business leader indicated that a USD 10 to 11 million price for 42% of the country’s best known clothing retailer was a good price for the buyer who is already big in Malaysia where it has 38 stores, in Vietnam with eight stores and eight stores in Indonesia totaling 44 department stores.
The Parkson Retail Group Ltd. is listed in Hong Kong and operates 46 owned and six managed stores covering 31 major cities in China.
Asked whether a market Sri Lanka’s size, with a population of 21 million, had potential for a company like Parkson, he said: ``they started in Malaysia with a population of 28 million. They could reasonably expect greater prosperity here in the medium term.’’
Odel which began with a single store on Dickman’s Road in 1990 has grown into 15 stores with its flagship store at Alexandra Pace. The company posted sales of Rs. 3.8 billion and profit before tax of Rs. 264 million in the year ending March 31, 2012.