Financial Times

Hard times for Lankan venture capital firms
By Nimesha Herath
Sri Lanka’s venture capital industry is going through troubled times with the number of investment firms at just two from six in 1993 primarily due to investments turning sour.

“The future of venture capital investments is good as dead under the current scenario where investments in some ventures that failed,” an industry specialist said.

CF Venture Fund Ltd, one such company which burnt its fingers in venture capital, has changed its name to V Capital Ltd and moved to more firmer ground in construction.

“The performance of the ventures (firms) was very poor. Their future seemed bleak and there was a need for us to step out of those investments since we were running at a loss,” Z. A. M. Thahir, Director, V Capital Ltd said, explaining their diversion. “We sold out the remaining venture Carbrique (Pvt) Ltd by end of March 2005 and cleared our hands on all venture capital investments.”
He said V Capital turned over a new leaf in management from January 2005 promising a different approach in handling the investments.

“The participation of the ventures in the projects was not enough. We had little control in the process that resulted in us bearing losses at the end. This time we will have full control in the investment since we will commence business with an initial investment and later sell off to others.” Thahir noted that the new management succeeded in accumulating Rs 75 million that was due for a long time.

This money will be directed to short term investments.
With a 30 million-rupee investment in six plots of small land of about 8-10 perches each, V Capital has established Jaya Sevena Housing (Pvt) Ltd, a subsidiary, to engage in housing business. “The company has been in operation for 14 years and we will continue to be in venture investments. Only this time we’ll have a more efficient mode of operation.” Thahir said.

Sumith Arangala, Chief Executive Officer, Lanka Ventures said they were not in a position to finance smaller firms which are struggling with management issues and resources being pinned out. “They require a great deal of corporate governance and there is a limit for us to be actively involved with them,” he said adding that there is a need for them to diversify their products.

Further more he said that they have changed strategies to investing in about two or three projects a year rather than handling numerous projects as done in the past. “We are now targeting sectors which are backed up by established promoters with a good track record. We should be investing in areas like health, energy, etc.”

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