Vanik on a restructuring drive

Hiran H. Senewiratne

Vanik Incorporation will hold an Extraordinary Shareholder meeting to get the approval from shareholders for a restructuring plan following the consistent losses reported during the recent past, sources said.

The company’s cumulative loss is around Rs seven billion and with the restructuring plan we could be able to show a positive balance sheet before the end of year 2009”, Vanik Group Chief Executive Officer, (CEO) Justin Meegoda told the “Daily News Business”.

He said once the restructuring and divesting plan is completed they will revive and expand existing operations that include merchant banking operations, insurance brokering, inter banking, money brokering, IT operations and company secretariat business.

Currently, these subsidies are growing at low level and after the divesting and restructuring process the company will have adequate funds to expand existing business operations, he said.

Last year, the company underwent a difficult time as some of the shareholders tried to oust some of the officials in the board and it was subsequently settled with the intervention of certain top officials.

“The releasing of the company’s audit reports was also delayed due to the company’s shareholder disputes. The audit report was released by the audit firm with the resolving of internal disputes,” he said.

Under the new Companies Act it has to be gazetteed 60 days prior to the meeting. Therefore, it is now planning to gazette for the purpose of calling up the meeting in the future, Meegoda said.

He said that creditors have waived the accrued interest, converting liability in to equity and reducing capital. This will enable to wipe out most of losses once the restructuring plan is implemented.

According to Meegoda the interest alone will amount to Rs 2 billion, the reduction of shareholder capital is Rs 700 million totaling Rs 2.7 billion, which is taking off the loses from the restrucuturing exercise, that will enable limproving the balance sheet to a greater extent.

“After the shareholder agreement we will be able to start restructuring process in the third quarter of the year,” he said.

Vanik group has more than 23500 shareholders throughout the country, out of which 20 are holding more than 50 per cent of the shareholding.

The major shareholders of the company are Care Clean (7.8 per cent shares), Cey Bank Unit Trust ( 6.5 per cent shares) and Dr T. Senthilverl ( 9 per cent).

Vanik Incorporation Ltd. was initiated in January 1993. VANIK became the first financial institution in Sri Lanka to have a public issue of bonds.

These bonds were subsequently quoted on the CSE in order to facilitate secondary market trading. This corporate financial move was followed by another significant event - the formalisation of Vanik Bangladesh Ltd, recognising the SAARC region as the next area of growth, was a step forward in establishing VANIK as the forerunner of regional expansion in the local merchant banking sector.