SDB announces secondary public offering

Sanasa Development Bank (SDB) announced the issue of shares via a secondary public offering (SPO), which invites the public to purchase up to 68,000,000 ordinary voting shares (Initial Issue) and 20,000,000 more ordinary voting shares in the event of an oversubscription (Further Issue).

Ultimately, the SPO amounts to a total issuance of up to 88,000,000 of new ordinary voting shares of SDB.

Accordingly, the issue price was reported to be determined three market days prior to the date of the extraordinary general meeting (EGM). In addition, the issue price is based on one month of the Volume Weighted Average Price (VWAP) of SDB shares as at such date (Issue Price).

Moreover, the date of price determination for the issuance of shares via the SPO was set on 20 May 2021. The bank also stated that the Issue Price to the market will be announced upon the determination of three market days prior to the EGM date, as mentioned above.

The new ordinary voting shares to be issued through the SPO, once allotted, was reported to rank equal with the existing ordinary voting shares of SDB.

Also, SDB stated that this includes the right to participate in any dividend declared by SDB, subject to the shareholding limits set out in the Banking Act No. 30 of 1988.

The bank has also made an application to the Colombo Stock Exchange (CSE), as per Rule 5.5 of the CSE Listing Rules, to seek approval for the issue and the listing of the new ordinary voting shares under the SPO by way of a prospectus.

The fundraising via the SPO is to receive shareholder approval by a special resolution at the EGM and the subsequent receipt of in-principle approval of the CSE for the issue.

As per the request made by SDB, the CSE, in consultation with the Securities and Exchange Commission (SEC), has decided to grant a waiver of Rule 2.1.1 (g) of the CSE Listing Rules to SDB.

This provided the bank with 20% of the shares on offer made available to retail individual investors as defined in the CSE Listing Rules (applicable where the value of the public subscription is below Rs. 3 billion).

The utilisation of the issue of shares via SPO involves further strengthening the equity base of SDB and thereby improving Tier 1 capital adequacy requirements stipulated under the guidelines of the Central Bank of Sri Lanka (CBSL).

The second objective involves utilising the funds to influence the growth in the loan portfolio of SDB. Accordingly, the funds raised via this issue would be used to meet the planned credit growth of SDB during 2021 and 2022, including the provision of short and medium-term financial assistance primarily targeting retail and SME (small and medium-sized enterprises) sector customers.

As at 31 December 2020, gross loans and receivables stood at Rs. 106 billion, which is an increase of 19.45% over the loans and receivables in 2019. The monthly average disbursement of loans and advances for the first quarter ended 31 March 2021 was Rs. 7.335 billion.

The market price of the shares of SDB in April 2021 (i.e. the latest practicable date prior to dispatching of the circular to shareholders) was Rs. 50.60.

SBD has also been able to maintain a consistent growth despite the negative economic outlook owing to the Covid-19 pandemic by reporting a profit after tax (PAT) of Rs. 836 million in FY2020.

The PAT in 2020 marked the highest profits achieved by SDB in its history, with the net interest margin of SDB for the period standing at 5.89%. The bank also carried out a capital raising of Rs. 1.5 billion through a Rights Issue to strengthen the equity base of SDB, which was structured as the first phase of the five-year capital raising plan of SDB.

The Rights Issue of SDB made history in the CSE by being the first fundraising carried out by a public listed company in Sri Lanka on the CSE via digital means, connecting both local and foreign shareholders to participate in the capital raising amidst multiple challenges posed by the pandemic.

SDB now intends to launch its second phase of the capital raising to further strengthen the Tier 1 capital base to support the anticipated asset growth of SDB over the next three to four years.