Sampath – ShoreCap deal may dilute holdings

By Duruthu Edirimuni Chandrasekera

Sampath Bank’s talks with ShoreCap International Ltd -- a company focusing on providing loans to micro and small businesses in developing economies --, for a possible investment, may be to keep the bank’s existing shareholders at bay, according to stock market analysts.

According to the bank’s top management, ShoreCap is interested in a new share issue. “This is probably a private placement restricted to a group of people. If Sampath brings in new shares it will definitely dilute the existing shareholders,” a stock market analyst explained.

However a senior official at Sampath Bank said Sampath is interested in harnessing ShoreCap’s expertise in micro and small businesses.

“Sampath needs to meet the capital adequacy requirements of the Central Bank. ShoreCap’s planned investment will provide the capital,” he said. He dimissed suggestions that the prospective liaison of ShoreCap is to dilute the holdings of the bank’s existing shareholders.

The stock market analyst noted that unlike some private banks which are its competitors, the Sampath Bank’s management runs the bank without interference from its top shareholders. “Strictly speaking they are independent from the (main) shareholders,” he said. Sampath recorded Rs.1.2 billion profit for 2007 compared to Rs.1.07 billion in 2006, which is a six percent growth.