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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Japanese shareholders in Asia Capital want money back

Japanese shareholders in Asia Capital want money back

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fireshelter

fireshelter
Associate Director - Equity Analytics
Associate Director - Equity Analytics

  • Accuse senior management of malpractices and call for their removal 

  • Write to major shareholder urging action but disappointed over delay

  • Japanese have invested $ 18 m in various ACAP projects; want money returned with interest and legal fees

  • ACAP facing legal and management battle; reports Rs. 669 m loss for FY20 enlarging retained losses to Rs. 1.9 b


Longstanding Japanese shareholders of Asia Capital PLC (ACAP) are demanding their money amounting to $ 18 million back plus interest and legal fees alleging no return on investment due to serious malpractices by senior management.

The Japanese investors own nearly 15% stake in ACAP with first investment made way back in 2012. There are two Japanese Directors on the Board as well. 

The apparent disappointment and extreme and unprecedented action of demanding money back is because ACAP hasn’t provided any return on their investments and Japanese have alleged malpractices and irregularities by the senior management of the company.

They had clarified that they are not against the company but specifically over the loss of faith and confidence on the senior management which includes Director/CEO Stefan Abeyesinhe and two Chief Operating Officers Reyhan Morris and Sandun Hettige.

The Japanese investors’ frustration is also over the failure by ACAP major shareholder owning 72% QI Group Chairman Vijay Eswaran who is based in Malaysia, to respond to issues raised in writing as well as face to face discussions last year and especially delay in taking action against the senior management. The demand to return $ 18 million plus interest and legal fees is as last resort redress Japanese investors have said. 

Japanese investors had also warned ACAP that if no action taken, they will be compelled to take the dispute to Japanese Ministry of Foreign Affairs, Japanese Embassy in Sri Lanka, the Colombo Stock Exchange, and the Securities and Exchange Commission in both Sri Lanka and Japan. Additionally legal action has been indicated as well. 

ACAP has 6,050 public shareholders with a public float of 18.6% as at 31 March. 

Daily FT learns lawyers representing the interest of Japanese investors had discussions recently on host of issues raised as well as allegations of unethical practices on the part of ACAP senior management. The efforts have thus far failed to resolve the disputes. 

The once ground breaking and well respected investment bank ACAP has of late diversified into leisure and other sectors and has an usually high subsidiaries and associates numbering over 20. 

Japanese demand for capital and interest and legal fees are over the investments made including Shinagawa Beach Hotel Balapitiya, Taprobana Hotel Wadduwa, Kosgoda Beach Hotel, Galle Beach CC Trust and Asia Leisure Holdings.

ACAP has been making losses since FY12 except a usually high Rs. 208 million profit attributable to ordinary shareholders in FY18 and Rs. 35 million in FY19. 

As per interim results released early this month, the loss in FY20 was a staggering Rs. 669 million.  Liabilities mainly bank overdraft and short to medium term debt had increased by Rs. 700 million in FY20. Investments business has suffered a Rs. 465 million loss as against a profit of Rs. 241 million in FY19 whilst leisure business loss however has been reduced to Rs. 197 million from Rs. 261 million loss in FY19. 

Retained losses as at 31 March was Rs. 1.9 billion up from Rs. 1.1 billion a year ago. Group revenue in FY20 was down 63% to Rs. 406 million. 

In the interim results ACAP said the COVID-19 outbreak since early 2020 has brought about additional uncertainties in the Group’s operating environment and has impacted the Group operations. “The Board together with the management is committed to withstand the negative effects and short term uncertainty this pandemic has created and confident that the company is in the possession of required resources and capabilities to achieve this,” ACAP stated in the interim results.

Group assets have been stated at Rs. 4.8 billion as at 31 March. Of the assets Rs. 4 billion are in the leisure sector. 

In its last published Annual Report (FY19), the company said in the leisure sector, it successfully increased presence following the launch of the 57-room Le Grand, Galle under the Asia Leisure banner in July 2018. “Over the years we have continued to consolidate our presence in this space, by taking measured steps to expand our footprint along the southern coastal belt,” the company added.

Including the Le Grand, ACAP Group portfolio by end of FY19 consisted of six hotel properties thereby growing market share in small luxury hotel space.

In the Maldives a 70-room Miriandhoo was completed on schedule as well in November 2018 with a management contract with the internationally acclaimed Westin Group.

Three projects remained ongoing as at 31 March 2019 the 96-room hotel project in Galle, the mixed development project on Marine Drive and the 447 Luna Tower residential condominium property and FY19 Annual Report stated they were scheduled to be completed over the next 12-18 months. 

Win Win


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@fireshelter wrote:

  • Accuse senior management of malpractices and call for their removal 

  • Write to major shareholder urging action but disappointed over delay

  • Japanese have invested $ 18 m in various ACAP projects; want money returned with interest and legal fees

  • ACAP facing legal and management battle; reports Rs. 669 m loss for FY20 enlarging retained losses to Rs. 1.9 b


Longstanding Japanese shareholders of Asia Capital PLC (ACAP) are demanding their money amounting to $ 18 million back plus interest and legal fees alleging no return on investment due to serious malpractices by senior management.

The Japanese investors own nearly 15% stake in ACAP with first investment made way back in 2012. There are two Japanese Directors on the Board as well. 

The apparent disappointment and extreme and unprecedented action of demanding money back is because ACAP hasn’t provided any return on their investments and Japanese have alleged malpractices and irregularities by the senior management of the company.

They had clarified that they are not against the company but specifically over the loss of faith and confidence on the senior management which includes Director/CEO Stefan Abeyesinhe and two Chief Operating Officers Reyhan Morris and Sandun Hettige.

The Japanese investors’ frustration is also over the failure by ACAP major shareholder owning 72% QI Group Chairman Vijay Eswaran who is based in Malaysia, to respond to issues raised in writing as well as face to face discussions last year and especially delay in taking action against the senior management. The demand to return $ 18 million plus interest and legal fees is as last resort redress Japanese investors have said. 

Japanese investors had also warned ACAP that if no action taken, they will be compelled to take the dispute to Japanese Ministry of Foreign Affairs, Japanese Embassy in Sri Lanka, the Colombo Stock Exchange, and the Securities and Exchange Commission in both Sri Lanka and Japan. Additionally legal action has been indicated as well. 

ACAP has 6,050 public shareholders with a public float of 18.6% as at 31 March. 

Daily FT learns lawyers representing the interest of Japanese investors had discussions recently on host of issues raised as well as allegations of unethical practices on the part of ACAP senior management. The efforts have thus far failed to resolve the disputes. 

The once ground breaking and well respected investment bank ACAP has of late diversified into leisure and other sectors and has an usually high subsidiaries and associates numbering over 20. 

Japanese demand for capital and interest and legal fees are over the investments made including Shinagawa Beach Hotel Balapitiya, Taprobana Hotel Wadduwa, Kosgoda Beach Hotel, Galle Beach CC Trust and Asia Leisure Holdings.

ACAP has been making losses since FY12 except a usually high Rs. 208 million profit attributable to ordinary shareholders in FY18 and Rs. 35 million in FY19. 

As per interim results released early this month, the loss in FY20 was a staggering Rs. 669 million.  Liabilities mainly bank overdraft and short to medium term debt had increased by Rs. 700 million in FY20. Investments business has suffered a Rs. 465 million loss as against a profit of Rs. 241 million in FY19 whilst leisure business loss however has been reduced to Rs. 197 million from Rs. 261 million loss in FY19. 

Retained losses as at 31 March was Rs. 1.9 billion up from Rs. 1.1 billion a year ago. Group revenue in FY20 was down 63% to Rs. 406 million. 

In the interim results ACAP said the COVID-19 outbreak since early 2020 has brought about additional uncertainties in the Group’s operating environment and has impacted the Group operations. “The Board together with the management is committed to withstand the negative effects and short term uncertainty this pandemic has created and confident that the company is in the possession of required resources and capabilities to achieve this,” ACAP stated in the interim results.

Group assets have been stated at Rs. 4.8 billion as at 31 March. Of the assets Rs. 4 billion are in the leisure sector. 

In its last published Annual Report (FY19), the company said in the leisure sector, it successfully increased presence following the launch of the 57-room Le Grand, Galle under the Asia Leisure banner in July 2018. “Over the years we have continued to consolidate our presence in this space, by taking measured steps to expand our footprint along the southern coastal belt,” the company added.

Including the Le Grand, ACAP Group portfolio by end of FY19 consisted of six hotel properties thereby growing market share in small luxury hotel space.

In the Maldives a 70-room Miriandhoo was completed on schedule as well in November 2018 with a management contract with the internationally acclaimed Westin Group.

Three projects remained ongoing as at 31 March 2019 the 96-room hotel project in Galle, the mixed development project on Marine Drive and the 447 Luna Tower residential condominium property and FY19 Annual Report stated they were scheduled to be completed over the next 12-18 months
Retailers should exit asap

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