SMB rights issue to infuse Rs 122.38 m to boost capital

Seylan Merchant Bank (SMB) plans to carve out space for growth by bringing its capital adequacy ratios on par with those of leading commercial banks through a rights issue of one share for every three held.

The issue is expected to result in an infusion of Rs 122.38 million which will enable SMB to increase its Tier II Capital Adequacy Ratio to around 10 per cent, enabling the bank to enhance its borrowing limits. The shares will be issued at Rs 11 per share, with a premium of Rs 1 to some 7200 shareholders of SMB. Renunciation will be allowed up to Tuesday, July 12, the bank said. About 60 per cent of the existing shares are held by companies of the Ceylinco Group.

Applications for additional shares will be permitted and also close on July 12. If by July 12th the rights issue is fully oversubscribed, the additional shares will be refunded. If not, the unallotted shares will be allocated to applicants on a pro rata basis.

Director/General Manager of SMB Rohan Senanayake said he believes the SMB share to be undervalued in the context of historical performance.

"There has been encouraging interest in the progress of SMB and this Rights Issue will facilitate a new phase of growth," he said.

SMB also commenced property development projects through a new entity, with a view to capitalising on the strong demand for housing, evident at present.

For the financial year ended 31st December 2004 the SMB Group reported a consolidated profit of Rs 54.1 million.