Ericsson Telecommunications Lanka (Pvt) Ltd., the wholly owned Sri Lankan subsidiary of Ericsson, Sweden, a world leader in telecommunications, recently opened its new head office in Sri Lanka.
The company which had hitherto been housed in a cramped, obscure building moved into a spacious, modern office complex at Highlevel Road, Kirullapona.
Ericsson which has had a growing presence in Sri Lanka for the past twenty years is in alliance with Metropolitan Communication Ltd., in carrying out its local operations.
The company has regional offices in Kandy and Kalutara. More offices are to be opened as the company expands its local presence, an official said.
Lars Silverling, the Managing Director told a media briefing that unlike other suppliers of telecommunications systems, Ericsson is here to stay. Responding to queries about plans of the company, he said they would make every effort to be a truly Sri Lankan entity, even though it would remain exclusively in Swedish hands. Among the steps taken in this regard is the extensive training of local staff.
Ericsson is engaged in the largest telecommunications project in Sri Lankan history, installing more than 150,000 new lines. Already the company has provided switching systems to exchanges in Katunayake, Wattala, Kelaniya, Kollupitiya, Panadura, Galle, Kandy, Nawalapitiya, Gampaha and Hatton. Plans are underway to install the system in Ampara, Batticaloa, Kalmunai, Kurunegala, Kalutara, Mannar and Matale. In Sri Lanka the company supplies systems to Sri Lanka Telecom, Sri Lanka Telecom Services and Mobitel.
Ericsson is well known for its advanced systems and products for fixed-wire and mobile telecommunications in both public and private networks. The company is the largest supplier of mobile systems in the world with over 40% of all cellular subscribers connected to Ericsson cellular systems.
Ericsson's switching system, the AXE 10, is the world's most widely used, with more than 100 million lines installed or on order in 114 countries around the world, company officials said.
The stalled plantations privatizations process will resume this month with the offer for sale of a 51 per cent stake in Agarapatana Regional Plantations Company, the Public Enterprises Reform Commission said.
Plantation privatizations were suspended after the sale of George Steuarts Plantations Management Services, which has acquired a controlling interest in Kotagala Plantations to a Malaysian party. Lankem Ceylon which has raised objections to this transaction at the time now appeared to have purchased this company from the Malaysian party, PERC Chief Rajan Asirwantham said.
The issue was further complicated by the fact that a partner in the law firm retained to investigate the affair was also a director of Lankem Ceylon. PERC Commissioners said they will not engage the services of the law firm for PERC activities in the future. PERC Commissioner Chandra Jayaratne was also a director of Lankem Ceylon.
"I have not participated in any transaction related to Kotagala or anything related to PERC," Mr. Jayaratne said. "I have made a declaration of interest to PERC and I have made a declaration of my interest to Lankem."
The Malaysian party who had transferred George Steuarts Management Services to Lankem Ceylon was now reportedly unable to transfer the sale proceeds out of the country.
However, the PERC said it had no power to cancel the sale of Kotagala Plantations.
The original transaction of the sale of George Steuarts Management Services to the Malaysian party had reportedly been arranged by the Merchant Bank of Sri Lanka. In addition a part of the funds used by Lankem Ceylon to purchase the company from the Malaysian party amounting to around Rs.100mn had been provided by the Bank of Ceylon, PERC Chief Asirwatham said.
He said the Bank of Ceylon had provided a credit facility to Lankem in the normal course of its business as it was a regular customer.
Mr. Asirwatham strongly denied suggestions that Lanka Electricity Company (LECO) would be sold for less than its net asset value. The net asset value of the company was Rs.4bn and not Rs.10bn, he said.
However the highest bid received for 51 per cent stake in the company was only Rs. 1.5bn while the valuation of Rs. 4bn for the company made the 51 per cent stake worth at least Rs. 2bn.
"The PERC has never sold a company for less than the valuation and it would not happen now," Mr. Asirwatham said.
As in the case of Orient Lanka, where the PERC held out for a minimum price of Rs. 1bn, LECO will not be sold until the minimum price was met, he said. He also said there was no question of privatising the CEB as it was not listed for privatization.
PERC said in case of monopolies such as Lanka Gas, the buyer was subject to a pricing formula for its products based on raw material prices and a ceiling of 10 per cent price increase per year. The recent Rs. 25 price increase had been within the formula. In addition there was a possibility of the price coming down once a new gas transfer pipeline was completed by July next year. The pipeline is expected to result in a saving of around US$ 80 per tonne in freight costs.
Mr. Asirwatham said the Air Lanka financial consultancy was almost finalised and 40% of equity would be offered to a core investor shortly. Others to be privatized included ITN, SMIB, State Trading Textiles, State Trading General Corporation, Sarasavi Film Studios, National Paper Co and Lanka Salt.
A Cabient sub-committee chaired by the President had been set up to overlook the privatization process. Ministers G. L. Peiris, Anuruddha Ratwatte, Ratnasiri Wickremanayake, Indika Gunewardene, Mangala Samaraweera, C. V. Gooneratne, Kingsley Wickremaratne and Deputy Minister Jeyaraj Fernandopulle are members of the Committee.
New capital infusion from National Development Bank (NDB) and its foreign partner, Commonwealth Development Corporation (CDC) has made the Bank's NDB venture Investments (NVI), Sri Lanka's largest venture capital fund, officials claimed, announcing a two pronged development of the fund.
The NDB and the CDC are both investing Rs. 350mn which will increase the fund to Rs. 930mn, officials said.
The two institutions have also teamed up to form a new fund management company, Ayojana Fund Management (Pvt) Ltd., whose General Manager will be CDC representative, Steven Enderby.
CDC's UK and South Asian regional officials, who were here to sign the agreement to launch the management company said they hoped that Ayojana would eventually be a stand alone company managing other local and regional funds.
While immediate objectives were to provide small and medium unquoted companies access to private capital, especially long term risk capital, CDC's expects eventually to encourage long term foreign investment here, CDC's Managing Director, Financial Markets, Robert Binyan said.
CDC's further investments here during a period of general economic downturn and bearish markets, prove its long term commitment to Sri Lanka's development potential.
By long term, we mean at least five to seven years, Mr. Binyan said.
NDB's General Manager, Ranjit Fernando said since privatisation in 1993, the bank had been searching for a strategic partner to develop its venture capital activities.
A collaboration was necessary not only to inject new capital but also for management expertise, he said.
CDC with its considerable experience in investment fund management, was able to provide the resources for long-term investment and the necessary management, marketing skills and technical expertise through link-ups in its branch network, Mr. Fernando explained.
With 5% of its share holding, CDC is one of NDB's largest private shareholders, Mr. Fernando said. When NDB was privatised in 1993, a 5% stake each was divested through private placements to four institutions, including CDC. The other three institutions which now have 5% holding in NDB are Citibank, Asian Development Bank and Diva Group. The government still holds 25% of NDB, while the public owns the rest.
CDC currently has 13 funds under its management.
Its role in assisting the economic growth in developing countries has seen $2.2bn in investment at the end of 1995, in 369 businesses in 50 countries. New investments for 1995 were in excess of $400mn, making CDC an important provider of investment capital in developing countries.
While CDC has interests in Pelwatte Sugar Co. Ltd., Vanik Incorporation, Kelanitissa power station, and is looking at a range of further investments, the flagship of investment here is its partnership with NDB, CDC officials said.
Ayojana's fund managers have earmarked potential areas of development like telecommunications, tea, rubber based industry and tea plantation sector.
Only about 25,000 tons of our tea exports are processed. The rest is exported in bulk form. Ayojana is looking at the tea packaging industry and the potential in value added tea packaging, Mr. Fernando said.
The company also sees potential in the subsidiary industries of privatised plantations, for example dairy farming. Nearly 85% of our total milk food requirement is imported at present, Mr. Fernando observed.
CDC officials said they had identified certain exported businesses that are doing even better than their regional counterparts in India, as probable projects for investment.
Ayojana General Manager Enderby who has over 10 years of experience in investment and banking in UK, Southern and Eastern Africa, and South Asia, said sound management, a local raw material base and a quality product are essential for potential investments.
Typical investments will be between Rs. 10mn to 50mn with an offer of 30% p.a. return. The fund will take a 10% to 30% equity stake in the enterprise.
Investment is offered at all stages from start up capital, expansion, privatisation to management buy out, in equity investment products like ordinary equity, preference, shares, convertible debentures and income participating loans.
As the businesses grow, the fund will be looking to divest their share holding in it, normally over a period of five years, ideally through a quotation on the Colombo Stock Exchange.
Ayojana Fund Management Pvt. Ltd's board of directors are: Chairman, Mr. Chandra Jayaratne, Directors, Ranjit Fernando, Mr. Barnabus (from NDB), Mr. David Peck and Mr. John Dewar, from CDC.
Tea Small holder Factories Ltd., (TSFL) which is making an initial public offering of 5.85mn shares of which only 3mn shares are on offer to general public, will close to the public as soon as the issue is fully subscribed sponsoring brokers, John Keells Stockbrokers said. The Rs. 10 shares are offered at Rs. 12 each.
Of the total issue, 2.85mn shares are offered on a preferred basis to tea smallholder who supply green leaf to TSFL. If the 2.85mn is under subscribed it will be kept open for subscription only by smallholders till the closing date, John Keells said. After the closing date any balance left over will be allotted to the public.
Tea Smallholder Factories was formed in 1991 to take over the factories of the Tea Smallholdings Development Authority. A 51 per cent stake in the company had been sold to a consortium comprising John keells Holdings, Central Finance Company and National Development Bank in 1994. The employees are to be given 10 per cent of the company and the balance 39 per cent of the company which is capitalized at Rs. 300mn is now on offer to the public.
The company is managed by John Keells Holdings Ltd., which a fee amounting to 0.75 per cent of gross turnover and 10 per cent of annual profits is charged.
The company also make CTC (Crush, Tea, Curl) tea and is planning to increase production in CTC teas, the prospectus said. A factory in Hingalgoda is to be converted to the manufacture of CTC teas.
John Keells Stockbrokers said prospective investors should be careful to note that this is not a plantations company but simply a processing unit for tea. Therefore the company would not be affected by wage demands of plantations.
The green leaf is supplied by smallholders who have small plots and their productivity is said to be high. TSFL mostly makes Low Grown tea which has been fetching the highest prices in recent times. In addition the company is extremely cash rich at present, analysts said.
In 1995 the company has made an after tax profit of Rs. 11.5mn on a turnover of Rs. 343mn. In the year ended March 1996 the company has made a pre-tax profit of Rs 74mn and an after tax profit of Rs 50.25mn, financial sources said.
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