Dialog enters financial services sector

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By 2017-09-13

By Ishara Gamage

Sri Lanka's mobile telecommunication giant Dialog Axiata PLC yesterday entered in to the formal financial service business by acquiring the controlling stake of the listed minor finance company Colombo Trust Finance Plc (formerly CAL finance ) for over Rs 1 billion. Analysts say this is three times their book value.
Dialog officials told Ceylon FT that they bought Rs 37.3 m or 80.34% stake of the Colombo Trust Finance PLC for Rs 28.70 per share. The seller was Cargills Bank limited.

Cargills Bank took control of Capital Alliance Finance PLC under the financial sector consolidation plan set in motion by the previous regime. The Bank initially bought a 73.4 per cent stake for over Rs 400 million. The seller was Capital Alliance Holdings Ltd.

As at 30 June, 2017, Cargills Bank Limited held 80.34 per cent of Colombo Trust Finance PLC, followed by Lankem Ceylon PLC and Divasa Equity which held 7.26 per cent and 2.41 per cent respectively.
This June quarter Colombo Trust Finance (CTF) recorded a Rs 2.2 m net profit and earnings per share was at
Rs 0.19. They had earlier applied for the Bank licence but did not succeed.

Meanwhile, the Dialog statement read, "This transaction which was approved by the Monetary Board of the Central Bank......of Sri Lanka was completed via a crossing on the Colombo Stock Exchange ('CSE') on 12 September 2017 at a transaction value of LKR 1,072 Million. In accordance with the Takeovers and Mergers Code of the Securities and Exchange Commission, Dialog will proceed to announce a mandatory offer to the remaining shareholders of CTF".

The acquisition of CTF by Dialog Axiata PLC will facilitate the expansion of the scope of operations of the Dialog Group in to the sphere of mainstream Digital Financial Services. Dialog aims to bring together the realms of advanced digital connectivity and cutting-edge Financial Technology (FinTech) to deliver a revolutionary suite of products and services which will expand the vistas of financial inclusion in Sri Lanka. Significant within the envisaged inclusion drive, will be a focus on financing solutions aimed at increasing the affordability and accelerating the adoption of digital devices and services by a wide spectrum of consumers and businesses.

Dialog Axiata entered the sphere of financial services in 2012 when it was licensed by the Central Bank of Sri Lanka to operate the country's first Mobile Payment Service eZ Cash. Now in its fifth year of Operation, eZ Cash has over the years secured over 2.8 million Mobile Payment subscribers from across Etisalat Hutch and Dialog Mobile Networks. In 2015, eZ Cash won the GSM World Award for best Mobile Payment Network Globally in recognition of being the World's first end-to-end inter-operable mobile payments network. More recently, Brand Finance named eZ Cash as Sri Lanka's highest valued e-commerce brand. Dialog also operates the TOUCH contactless transport payment service under license by the Central Bank of Sri Lanka.

They said with this acquisition CTF will operate alongside the Digital Services Portfolio of the Dialog Group. Other digital ventures of the Dialog Group include Sri Lanka's leading e-commerce portal WoW.lk operated by Digital Commerce Lanka, Doc.lk operated by Digital Health (Pvt.) Ltd. and the country's leading digital education service Guru.lk operated by Headstart Pvt Ltd.,

Director/Group Chief Executive – Dialog Axiata PLC, Supun Weerasinghe said, "Dialog envisages that its foray into financial services would help accelerate Sri Lanka's drive towards adoption of Digital Financial Services by encouraging digital savings and increase access to financial services for all segments of society. Dialog would also leverage this acquisition to drive down the entry barriers for adoption of smart technology and devices through inclusive financing solutions." NDB Investment Bank acted as Financial Advisers to the acquisition, while FJ & G de Saram acted as legal advisors to the transaction.

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