August 13, 2018 (LBO) – Colombo Stock Exchange listed Abans Finance PLC (AFSL) released quarterly results for the period ended June 2018.
The CBSL registered finance company reported a modest profit of Rs18mn for the quarter on an equity base of over Rs1.5bn. Total assets were Rs8.8bn, while total deposits were Rs6.5bn.
The balance sheet of the company actually shrank from the previous quarter with total assets and deposits both down 2% in the 3 months ended June 30 2018.
Approximately 2 years ago AFSL attracted a private equity investment from newly established Sri Lanka private equity fund Ironwood Investment Holding. Currently Ironwood owns approximately 42% of the total shares outstanding. The shares were acquired and capital infused into the company in several transactions at Rs25/share.
With a minority stake in the company, and the firm’s book value close to Rs24/share, it is unclear whether this will turn out to be a successful investment for the private equity firm. Many higher quality finance related stocks are trading at a fraction of book value, with much better liquidity.
In addition to likely overpaying for their investment in AFSL, Ironwood may also be troubled by the fact that minority shareholders in Sri Lanka have had a long history of being oppressed. Minority shareholder oppression has been a key factor that has stunted the development of the private equity industry in Sri Lanka.