Cash-rich CT Group rationalises investments
Ceylon Theatres Holding (CTH) Group, a Sri Lankan holding company and investment arm of several businesses, is undergoing a process of rationalisation and ‘sustainable’ value creation.
In one of the most significant business transactions in recent times, the group – involved in the food and beverage sector, consumer goods, retail marketing, property including real estate and condominium development and the financial sector with the Cargills Agriculture and Commercial Bank, disposed of its interests in the industrial goods and plantations sector with the sale of subsidiary Lanka Ceramics.
“The group now has a cash surplus of Rs 5 billion and these funds would partly go towards strengthening the cash reserve, for strategic investments and in consolidating our businesses,” said CTH Managing Director Ranjit Page.
Ranjit Page
Sitting down for an interview in Colombo this week after the sale of Lanka Ceramics, Mr. Page said, “the transaction overall made good business sense, we got a fair return and the sale hasn’t had any impact on the share price of CTH.”On Tuesday, CTH sold a majority stake in Lanka Ceramics to Royal Ceramics controlled by entrepreneur Dhammika Perera in a deal aided by his close associate Nimal Perera. The near 3-billion rupee transaction was another conquest by the duo, making waves in Colombo’s corporate circles for the past few years. Their acquisitions include control of Hayleys and Delmege Forsyth.
Mr. Page, driver of the tremendous growth at CTH subsidiary Cargills, spoke on a range of issues saying the reason for exiting from Lanka Ceramics was because the group is looking at synergies with existing businesses and shareholder value creation. “We also look at the value of our subsidiaries, and how this value is reflected in the ultimate holding company, CTH,” he said adding that “our objective in each of these businesses is to aggressively grow and lead the industry”.
CTH’s new cash flow of Rs 5 billion includes Rs. 2 billion raised last year from funds generated from a rights issue for its new bank and other investments. In March, World Bank affiliate International Finance Corporation and Germany’s DEG – Deutsche Investitions took a 10 per cent stake, each in the new bank. Mr. Page said the foreign investment component in the bank has risen to 30 per cent and sought to explain that the full requirement of capital for the bank has already been raised without any issues. “CTH had a private placement and rights issue in 2011 for all its investments and our investment has already been infused into the bank. The interest in subscribing for the bank’s shares was substantially above the capital requirement”, he said, adding that IFC and DEG coming in meant all the proceeds from this sale plus stakes taken by top corporates in the bank saw enough money being raised.
In the case of Lanka Ceramics, the group received some offers from overseas but felt that the brands ‘Lanka Ceramics’, ‘Lanka Tiles’, etc should be retained by a local player who could grow the industry and the business for the benefit of all shareholders and employees. “For CTH, people and their interests are very important.
We wanted to ensure their security and growth under the new owners. This is why you can see continuity in certain aspects of this transaction,” he said.
Responding to questions on Cargills debt burden, Mr. Page said the debt at Cargills has been capped and will reduce over the next two years. Improvement of cash flow would arise from the roll out of new products, enhanced market share and improved returns from new ventures.
On the property sector, the group has a sizable land bank of some 10 acres in and around Colombo, some of which are yet to be utilized. He said the ‘Empire’ continues to be the benchmark for super-luxury apartments in the country while the gated community project in Piliyandala continues to receive a very positive response from clients.
The group is also planning to open a shopping mall in Jaffna within the next quarter. “Overall we are in a strong position. To raise the bar in our property interests, we have partnered Keppel, a regional leader in the property development industry, and a multi-storey residential development in Kotahena would be the first project in this relationship. In the future we may look to align with strategic partners that share our vision and scope in other business sectors as well.” he added.
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