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We have lot of news about AAF. Lets analyze!
AAF intended decision to have a cross holding with Chilaw Finance (CFL) is a good one for both majority shareholder of AAF and CFL but not so good for the two finance companies. By each Finance company having 10% holding in the each other, Shareholders of AAF (namely Asia Capital) and CFL would be able to drain out approximately Rs 100mn from each other finance companies to pocket of its shareholders.
As a result of this transcation the Cash per share and Core Capital of both finance companies would reduce as the cash balance would be replaced by the investments in shares which is considered high risk. This is a cause for concern for Depositors of both AAF and CFL, especially when considering the current crisis prevailing in Finance Companies due to sharp decline of interest rates and resultant increase in Non Performing Loans (NPL).
This fishy cross holding plan must be welcome news for the Asia Capital as they are continuously struggling to stay above water due to sever draining of money due to high cost of overheads and other administrative expenses which is in the region of Rs 800mn per annum.
Shouldn't the Central Bank, the guardian of the Depositors question this transaction and investigate the intentions of the majority shareholder of both these Finance Companies?
In so far as Foreign Party, I guess this is a ploy adopted by Asia Capital create interest in the AAF Share. If there is a real foreign investor I think its is good for them, but non disclosure of the name of the buyer is very fishy. After all, who care!!, the cost of Due Diligence will have to be borne by the Central Bank. (As per CB announcement of mergers)
Also SEC, should seriously look at what AAF has done. How could the board allow a unnamed company to carry out due diligence of the Company. Investor who is carrying out the Due Diligence will have inside information about AAF and they together with their Nominees would be able to buy shares based on such information. As minority shareholders we are not preview to such information and we all might get sucked in by the foreign investor who got Inside Information of AAF.
Therefore don't you think that SEC should immediately stop the Due Diligence or ask AAF to disclose the name of the buyer!!
AAF intended decision to have a cross holding with Chilaw Finance (CFL) is a good one for both majority shareholder of AAF and CFL but not so good for the two finance companies. By each Finance company having 10% holding in the each other, Shareholders of AAF (namely Asia Capital) and CFL would be able to drain out approximately Rs 100mn from each other finance companies to pocket of its shareholders.
As a result of this transcation the Cash per share and Core Capital of both finance companies would reduce as the cash balance would be replaced by the investments in shares which is considered high risk. This is a cause for concern for Depositors of both AAF and CFL, especially when considering the current crisis prevailing in Finance Companies due to sharp decline of interest rates and resultant increase in Non Performing Loans (NPL).
This fishy cross holding plan must be welcome news for the Asia Capital as they are continuously struggling to stay above water due to sever draining of money due to high cost of overheads and other administrative expenses which is in the region of Rs 800mn per annum.
Shouldn't the Central Bank, the guardian of the Depositors question this transaction and investigate the intentions of the majority shareholder of both these Finance Companies?
In so far as Foreign Party, I guess this is a ploy adopted by Asia Capital create interest in the AAF Share. If there is a real foreign investor I think its is good for them, but non disclosure of the name of the buyer is very fishy. After all, who care!!, the cost of Due Diligence will have to be borne by the Central Bank. (As per CB announcement of mergers)
Also SEC, should seriously look at what AAF has done. How could the board allow a unnamed company to carry out due diligence of the Company. Investor who is carrying out the Due Diligence will have inside information about AAF and they together with their Nominees would be able to buy shares based on such information. As minority shareholders we are not preview to such information and we all might get sucked in by the foreign investor who got Inside Information of AAF.
Therefore don't you think that SEC should immediately stop the Due Diligence or ask AAF to disclose the name of the buyer!!
