LOLC aims to be at the top slot
Having grown tremendously in the last decade, LOLC Group PLC is aiming to be in the top three of the most profitable listed companies in Sri Lanka.
Mr. Kapila Jayawardena
This has become a very short term goal for them as some 60 per cent of their profit comes from the many overseas ventures LOLC has cottoned on to over the past decade. “Our success was not achieved overnight. It was managed in the last five years,” Kapila Jayawardena, Group Managing Director and CEO LOLC Group PLC told the Business Times in an interview last week.
The group’s financial sector, especially in the micro financing area has grown by leaps and bounds through overseas tie-ups. Apart from Prozac in Cambodia which the company managed for the last one and half decades, LOLC also has another micro financing arm in Cambodia called LOLC Cambodia. The group also operates in Myanmar, Pakistan, Philippines and Indonesia in the micro financing space. LOLC’s model in venturing overseas in micro financing has been in two emerging markets with high population. In this regard, Mr. Jayawardena noted that the group is eyeing a few other ventures in Asia and Africa. “We want to start a venture in India and also in Zambia. We will be going to these places as usual with strong partners.”
The group’s profitability hasn’t been affected by the macro economic downturn the country experienced last year. “LOLC works with those in the bottom of the pyramid. They are relatively insulated from the macro economic downturns. The farmer or the handlooms entrepreneurs are relatively insulated from the economic vicissitudes such as exchange rate depreciation,” Mr. Jayawardena explained.
But the motor financing sector was affected. There was a drop in volumes in automotive loans and leasing owing to the hike in interest rates, low demand and various restrictions imposed by the authorities, Mr. Jayawardena noted.
LOLC subsidiary Browns Trading which is the agricultural arm has done very well. “We are the market leader in batteries and we are consolidating this position. If the gross domestic product picks up, the trading sector will do well,” Mr. Jayawardena added. LOLC is right sizing Browns in a bid to take advantage of the proposed economic growth, he said.
When asked if Browns are land where hotels Club Palm Garden and Riverina used to be, Mr. Jayawardena denied, noting, “We are not selling any hotels.” He noted that they are building a five-star hotel with 375 rooms. “There was a delay in obtaining certain approvals which is why we had to delay opening this hotel. We will open it next year.” Currently Browns is looking to tie up with international partners to manage the hotel.
Browns also have long-term plans for Paradise Dambulla, Dickwella Resort & Spa, Eden Hotel and Calm Passikudah. Also its magnum opus, the US$25 million, 160 room five star Sheraton Kosgoda will be opening this year. “This will be the flagship hotel for Sheraton in Sri Lanka,” Mr. Jayawardena added.
While this year will be a year of consolidation, LOLC won’t stop any acquisitions if it fits their strategy. “We will look at acquisitions if they are more deal oriented. They need to have the right synergy and also the right price,” Mr. Jayawardena said. He added that always they will be looking to acquire the majority stake.
LOLC will retain their stake in Seylan Bank in the medium time, he noted. Mr. Jayawardena cautioned that the financial sector which is the highest taxed at present is facing difficulties. He said that if this continues, companies will not have the cash to invest in modernising and digitising the financial sector. “We have a digitally literate population and we need to increase our digital infrastructure to serve this population. But if you get taxed, we will not have the necessary funds to invest more in digital technology.”
He also warned that by taxing the golden goose, the informal financial sector will grow.