Watching Brief

Dec 21, 2007 (LBO) – Lanka Rating Agency said Friday it had placed BB3 rated Multi Finance Company on rating watch, pending a take-over from the Ceylinco group. Multi Finance, a small privately held finance company founded in the 1974, will initially get a 70 million rupee capital injection from Ceylinco Shriram Securities Holdings. Ceylinco is eventually expected to own 70 percent of the equity.

“The Rating Watch reflects the potential material changes in the Company’s financial and business profiles arising from the proposed capital enhancement and strategic investment by Ceylinco Shriram Securities Holdings Ltd,” Lanka Ratings said.

“Following this, controlling interest and the reins of management of Multi Finance will be turned over to CSSHL.”

The Ceylinco group has taken over several finance companies in the past.

The initial investment will bring capital up to 100 million. The Central Bank has put a 200 million rupee floor on core capital which is expected from Ceylinco Shriram later.

“While the capital enhancement reflects positively on Multi Finance, the new management’s risk appetite is still unclear vis-à-vis business an