May 26, 2006 (LBO) – Sri Lanka’s Nawaloka Hospitals Ltd.’s fortunes swung into the red after providing hefty 284.23 million rupees for its investments in Galadari Hotel Ltd. The largely family controlled private hospital made a loss of 267.07 million rupees after making a profit of 18.97 million rupees for the fourth-quarter ended March 31, 2006.
The net result brought down full year financials to 117.57 million rupee loss over a 116.67 million rupee profit reported over the same period 2005.
“Operationally their business is profitable, however their investment in Galadari and subsequent rise in finance costs seems to have hurt them the last quarter,” notes Dilhara Haputhanthri, analyst at C T Smith Stockbrokers.
Last August, Nawaloka bought a 24 percent slice in Galadari Hotels for 835.0 million rupees, for which it partly financed through bank borrowings.
However, owners of the Galadari Hotel this year decided to convert part of the debt (owed to the principle shareholder Galadari Brothers) into equity.
With the hotel continuing to make losses, analysts say that Nawaloka was left with the option of either selling their stake or buying more shares