Alliance Finance raises Rs 1 bn through Debenture Issue

Alliance Finance Company PLC, incorporated in 1956 raised ta sum of Rs one billion (Rs 1,000,000,000) through its Debenture Issue for the purpose of increasing the Tier II Capital of the company to enhance its Capital Adequacy Ratio and Single Borrower Limit, to expand the branch network, strengthen the company’s liquidity position and minimize the risk and gap exposure in the company’s assets/liabilities portfolios. The debenture issue was opened in June 2012.

The company provides financial solutions in the areas of hire purchase, leasing, term loans, operating leases, vehicle hiring, gold loans, consumer credit, fixed deposits, financing for consumer durables, collaboration finance, import finance, and other related financial services. During 2012 the company had optimized the country’s economic benefits and it helped to increase the Total Assets value up to Rs 14.8 bn (as at September 30, 2012 un-audited) and it was a growth of 34 % compared to the year 2011’s value of Rs 9.8bn.

The company announced unaudited earnings results for the 6 months ended September 30, 2012. For the 6 months ended, the company reported net interest income of Rs 634 mn against Rs 457 mn a year ago. Operating income was Rs 288 mn against Rs 226 mn a year ago. Profit before taxation was Rs 284 mn against Rs 212 mn a year ago. Net profit was Rs 254 mn against Rs 186 mn a year ago.

Managers & Registrars to the Issue was the Corporate Advisory & Capital Markets Division of Merchant Bank of Sri Lanka PLC, a copmpany quoted on the Colombo Stock Exchange in 1991. The bank’s largest shareholder is the Bank of Ceylon which holds a strategic stake of 72 % and in 2005 entered into a strategic alliance with SBI Capital Markets Limited, which is the largest investment Bank in India. The issue came with an option to increase up to Rs one billion (Rs 1,000,000,000) in the event of an over subscription of initial Rs 500 million (Rs 500,000,000) by issuing unsecured subordinated redeemable debentures. Each had a face value of Rs 100 which provided an opportunity to the investors to invest their money in fixed and floating rate Debentures for 3 to 5 year maturity period to get an attractive rate of over 20 % per annum.

The contribution to the over subscription provided mainly by Institutional investors constituting over 53 %, others including High net worth investors comprise 29 % and retailers contributed around 18 %.