Govt. aims to conclude Shell Gas takeover soon

By Santhush Fernando

Sri Lankan government is to conclude the re-acquisition deal of Shell Gas Lanka (Pvt) Ltd. (SGLL), the country’s largest Liquid Petroleum Gas (LPG) player in the very near future.
“The due diligence was earlier conducted and the Shell deal will be concluded in the very near future,” Sirisena Amarasekera, chairman of the Cabinet appointed Negotiating Committee overseeing the Shell deal and Prime Minister’s Secretary, told The Bottom Line.
Another senior official close to the deal confirmed that it was ‘unofficially finalised’ that the government will buy Shell’s 51 percent holding.
Last June, SGLL’s parent company- Royal Dutch Shell (RDS) offered to sell Shell Gas Lanka Ltd. and its wholly-owned subsidiary, Shell Lanka Terminal Ltd., as a part of its worldwide strategy to review its business units in Europe, Asia and Latin America. While the government already owns 49 percent stake of Shell Gas Lanka Ltd., Shell Lanka Terminal Ltd. is fully owned by the RDS. On June 17, the government expressed its willingness to take-over Shell Gas Lanka.
Earlier, W K H Wegapitiya, Chairman, Laugfs Holdings Ltd., Shell Gas Lanka’s rival and also a prospective bidder, announced that Laugfs too was interested in purchasing Shell Gas Lanka after his visit to London for negotiations with Royal Dutch Shell.
SGLL has been engaged in importing, storing, filling, marketing and selling LPG in Sri Lanka since 1995, after 51 percent of the then Colombo Gas Company was sold to Shell for US $ 37 million during the then Chandrika Bandaranaike Kumaratunga regime.
Shell virtually ran a monopoly till the second player, Laughs Gas, entered the local LP Gas market. Third players - Mundo Gas and Power Gas never succeeded to take off the ground due to undercutting by an existing player.

Sunway to make foray into Sri Lanka with RM250m project

Malaysian based Sunway Holdings Bhd. is making its foray into Sri Lanka to undertake a mixed development project with a gross development value of RM250 million, Malaysian news reports said.


Sunway said on Friday, Sept 24 it was teaming up with Dasa Tourist Complex Pte Ltd to build residential and commercial units in Colombo.

Its unit, SunwayMas Sdn Bhd will have a 65% stake in the JV company and Dasa Tourist 35%.
The mixed development will comprise of at least 318,000 sq ft of net saleable areas of residential units and 60,000 sq ft of net saleable areas of commercial units in Colombo city.

Sunway managing director Yau Kok Seng said the project would consist of a 34-storey building comprising 70 commercial units and 180 residential units on prime freehold land in the premium mixed-use zone of Bambalapitiya in District Colombo 4.

He said the project was expected to be launched in the second quarter of next year and to be completed by mid-2014. He added it would contribute “very positively” to the bottom line of the group.

“We are targeting Sri Lankans in the high-medium income and the high-end income groups. Even foreigners and those who are part of the Sri Lankan diaspora are expected to be interested,” he told a press conference.
On the pricing, Yau said the group was anticipated to launch the upmarket property with the residential units priced at about US$200 (RM618) per sq ft while that of commercial units at US$350 per sq ft.

"We are anticipating more than 20% net margin from this project," he said adding that the project enjoyed a five-year "tax holiday" from the Sri Lankan government from the time of completion.

Yau said the project would increase Sunway's landbank to more than 430 acres with potential GDV of RM2.6 billion which would be developed over the next three years.

Dasa Group chairman and founder S D Gunadasa said the JV marked an important milestone for the company's first venture in mixed development in Sri Lanka, stressing that it looked forward to more collaborations with Sunway Holdings in its future expansions.

"While the Sri Lankan property market gears itself for robust growth in the next five years, international collaborations with premier property players such as Sunway Holdings will contribute immensely to raise the standards in the industry as well as to create new benchmarks," he added.

Chinese investments in Lanka to rise - Economist

Authorities in Sri Lanka are currently mulling on providing additional space for Chinese investments to take place in Sri Lanka with areas like Godagama, Matara and the Eastern Province under the microscope, a top economist said.
According to him, the present existence of strong trading relationship between the two countries could now pave way for an increased flow of Foreign Direct Investment (FDI) from China, which is one of the fastest growing economies in the world.
“Entrepreneurs from China have been provided with an exclusive Export Processing Zone at Mirigama, and depending on the progress, additional space will be provided at Godagama, Matara and the Eastern Province,” Institute of Policy Studies executive director Dr Saman Kelegama said at a recent public lecture.
He said that of late, China has become a major investor in Sri Lanka with bilateral cooperation in tourism, mining, power generation, education, infrastructure, construction projects booming between the two countries.
“The telecommunications, power and energy industries attracted most of FDI inflows from China and presently 16 Chinese businesses have invested in garment, leather, telecom and electronics manufacturing facilities in the island,” Dr Kelegama said addressing on the topic ‘SL-China Economic Relations’ and held at the Bandaranaike Centre for International Studies in Colombo last week.
According to local immigration rules, all Chinese entrepreneurs who invest a minimum of US$ 25 million are provided with a Sri Lankan passport on the basis of a “second home” passport.

Most banks back CBSL rate-cut call

But negotiations likely on 30% range for credit cards

Sri Lanka’s private commercial banks are likely to respond positively to the recent call made by the Central Bank of Sri Lanka (CBSL) to lower interest rates on housing loans to 14 percent by the end of next month although they would appeal for a lower rate reduction on credit cards, a top industry official said.
CBSL on Thursday requested all private commercial banks to reduce interest rates on credit cards to 24 percent per annum, by the end of next month, following steep falls in policy rate cuts and lower economic risks.
“As far as housing loans are concerned, most of the banks have already reduced their rates in line with the Central Bank’s recent guideline even before the announcement came in. However, with regard to the recently requested rate reduction on credit cards, the association is mulling on negotiating the rate with the CBSL,” Sri Lanka Banks’ Association secretary-general Upali de Silva told The Bottom Line.
He said ‘most banks’ are keen on appealing to the Central Bank to make the rate on credit cards to hover around 30 percent given the high-risk factor prevalent in the business.
“We should understand that even the regional average rate on credit cards is also around the 30 percent range and for example in India it is about 32 percent,” De Silva added.
Meanwhile, when The Bottom Line spoke to Saliya Rajakaruna, the chief executive at Nations Trust Bank and one of the comparatively smaller banks operating in the island, he said the bank would respond positive by making efforts to comply with the request for rate-cuts on housing loans by the stipulated deadline.
“However, as far as reducing rates on credit cards is concerned, we will need some more time as the operating model for credit cards is fairly different,” he said.
In a statement made earlier in the week, CBSL had argued that since February 2009, its policy repurchase rate (at which money is injected to the market) has been cut by 300 basis points to 9 percent and the repurchase rate (at which money is drained from the market) has been cut by 300 basis points.
“Nevertheless, it has been noted that adjustments to lending rates of financial institutions generally tend to lag behind the adjustments to their cost of funds. Hence, it is expected that market lending rates would decline further in the period ahead, to fully reflect the recent relaxation of the monetary policy stance of the Central Bank,” the Central Bank said in its September monetary policy review.
The CBSL noted that the current macro economic performance and stability warrant a reduction in the risk premia added to lending rates, thus leading to the spread between lending rates and deposit rates of banks reducing further.
According to Central Bank statistics, loans from commercial banks to the private sector rose by 8.9 percent up to July 2010 from a year earlier while credit from all banks and finance companies had increased 9.9 percent in July from a year earlier.
In July alone, loans from commercial banks rose 23.4 billion rupees to 1,292 billion rupees compared to a 105 billion rupees increase for the preceding 12 months.

Bond rating

Fitch rates Sri Lanka's upcoming bond 'B+'

Fitch Ratings has assigned Sri Lanka's upcoming USD bond issue a rating of 'B+', a statement by the rating firm said.
 The rating is in line with Sri Lanka's Long-term foreign currency Issuer Default Rating (IDR) of 'B+', which has a Positive Outlook

Sri Lanka and Mexico 'best for long-haul value'

Sri Lanka and Mexico 'best for long-haul value'


Australia and Hong Kong were the least cost-effective destinations featured in the survey, which also revealed significant rises in the price of food, drinks and supermarket goods in Thailand and South Africa.
The Post Office's annual Long-Haul Holiday Report compares the cost of 10 essential holiday purchases – such as an evening meal, a cup of coffee and sun cream – in 22 destinations.

In Sri Lanka, the 10 items cost just £46.85, compared with £155.48 in the Australian capital, Sydney.
Research released this week by Hayes and Jarvis, a tour operator specialising in long-haul trips, also suggested that Sri Lanka is among the best-value destinations for a package holiday, with a one-week break in November costing £799 on average, bettered only by Egypt (£649) and the Dominican Republic (£729).
Sri Lanka has witnessed a sharp rise in visitors following the end to hostilities between government forces and Tamil separatists in the north and east of the island. 

Nearly 400,000 foreign tourists visited in the first eight months of 2010, an increase of 47 per cent on the previous year.
Thailand – the cheapest destination in the Post Office's 2009 report – fell to sixth in the survey, thanks in part to the strength against the pound of the Thai baht, which is worth 11.6 per cent more than last year. The 10 items cost £52.85 in Phuket, up by 16 per cent on last year.
Mexico and Kenya finished second and third in the survey. UK sales of the Mexican peso and the Kenyan shilling have risen by 5 and 11 per cent, respectively, while the Kenyan Tourism Board has reported a 7 per cent rise in British visitors.
Malaysia and Indonesia finished fourth and fifth in the survey, with the 10 items costing British visitors £51.89 and £52.39.

Sean Tipton from Abta , the travel association, emphasised the importance of prices on the ground, particularly with air travel becoming more expensive. The latest rises in APD, due in November, will add up to £240 to the cost of long-haul flights from the UK for a family of four.
"Long-haul travel can initially look unattractive, with air fares costing more than travelling to Europe," Mr Tipton said. "But many long-haul destinations are cheaper than the Mediterranean, with even a weak pound still going a very long way."
Elsewhere, prices in Australia, Canada and Brazil have all risen sharply, and sterling's recent weakness against the rand means that tourists visiting South Africa can expect to pay about 28 per cent more for food, drink and other holiday essentials this winter.

(Courtesy The Telegraph)

Britannia to wind up ‘unviable’ Lanka operation

Britannia to wind up ‘unviable’ Lanka operation

The Nusli Wadia-promoted biscuit maker, Britannia Industries, has decided to wind up its ‘unviable’ Sri Lankan operations, according to foreign media.

 Britannia entered the Sri Lankan market in 2008 by launching a range of biscuits under the brand name Britannia Lanka.
“The company had decided to withdraw from the operations in Sri Lanka as they were not found to be viable. The right thing for a management to do was realise and recognise something and act on it and it is precisely for this reason that the company decided to withdraw,” Wadia told shareholders of the company recently.

Britannia could not turn around its business in the island nation , thanks to stiff competition from the local and already established brands in that counrty, sources said.