The first Sri Lankan investment bank with overseas operations heads into 2023 with a greater focus on creating value for its clients and expanding its global footprint.
NDB Investment Bank is the market leader for investment banking in Sri Lanka, operating for over 25 years. Its four pillars of operations – equity fundraising, debt fundraising, mergers and acquisitions and corporate advisory – have stood resolute against waves of challenges and crises during that period. Having braved the turbulent waters of the past two years. Director/CEO Darshan Perera, COO, Kaushini Laksumanage and Senior VP/Head of Corporate Advisory Saminda Weerasinghe in conversation with Echelon shared a snapshot of their vision of what the future may have in store.
Looking back, what are some of the highlights you have achieved in the past year as a leading investment bank in Sri Lanka?
At NDB Investment Bank, our product offering focuses on four pillars which are equity fundraising, debt fundraising, mergers and acquisitions and corporate advisory. We’ve had a good couple of years, especially 2021 which included handling five IPOs and Secondary Public Offerings, substantial activity in mergers and acquisitions and a couple of debenture issues.
Unfortunately, the subsequent political and macroeconomic crises did lead to some challenges. A few activities set for the year didn’t take place, and things slowed down with the negative sentiments in the equity markets and the high interest scenario. Despite that, we still managed to do well. It made us more focused on our efforts; We arranged significant offshore funding, about 75 million USD in passivity for our ultimate parent company, NDB Bank and managed to conclude over 3 noteworthy M&A transactions. It also led us to focus on our overseas operations; In the recent past we have carried out two IPOs in the Maldives, the only investment bank in Sri Lanka that has accomplished this and a couple of debt fundraisings for resort and energy sector corporates in the Maldives. We wanted to do more fundraising for our Sri Lankan banks, but the macro situation prevented us from achieving our full potential. But we didn’t lose focus of what’s going on overseas and we see a lot of future opportunities in this area.
What is your outlook for the economy and capital markets for the year ahead?
Despite discussions taking place on debt restructuring, the expectation of interest rates to decline around the first quarter of 2023 would bring more certainty to the Government Securities market.
The IMF has proposed restructuring and privatizing State Owned Enterprises (SOEs) such as Sri Lanka Telecom, Lanka Hospitals, Waters Edge, Hilton and Sri Lankan Airlines; the latter either as one entity or broken into separate operations. We are confident in our search for suitable parties through our foreign collaborations to see if any interested parties would like to come in at the right time. With the finalisation of IMF commitments, the equity markets are expected to perform well and stabilise allowing IBs to bring in sizable IPOs to the market.
How would you advise investors to approach asset allocation? What are the opportunities and risks?
We expect interest rates to decline and an increase in liquidity with that. We anticipate more M&A activity subsequently, which opens up more opportunities for us; There are macro risk elements to this, but we are ready to face those challenges.
If an investor were to consider asset allocation, the prevailing high interest rates make fixed-income securities attractive due to good returns. Even when these rates decline, investors could still book capital gains. Equity and real estate sectors could be attractive once there is clarity on the trend in interest rates.
What strategies do you have to unlock opportunities and add value for your customers amidst the unfolding economic crisis?
In this macroeconomic environment, we find clients looking to expand outside of Sri Lanka or looking for external funds, especially for export-oriented businesses.
Thus, NDB Investment Bank is strongly positioned to cater to clients who are interested in raising external funds for their expansions/ divestitures in and out of Sri Lanka.
Building collaborations wherever possible is something we actively seek. In addition to that, we have strengthened our operations overseas. We are strong in Bangladesh and see a lot of potential in the scalability of the market there. We are also considering other regional markets, such as Southeast Asia which holds a lot of opportunity as well.
How do you nurture a culture of innovation and resilience to enable growth?
Being a human capital-based organization, our staff is very important to us. We provide plenty of training both in the workplace and externally. Many of our employees graduate with CFA qualifications. Besides providing training, we also empower them to get involved in each transaction from start to end and encourage them to be proactive in their work.
The pandemic made us rethink our approach. I believe we have achieved a far more mature level of resilience compared to how we were pre-pandemic.
We also emphasize creating an environment that fosters innovation. We have a dynamic team that is highly competent and deal-hungry. Our organization has a flat and open policy that allows everyone to work closely together. We give them the space to grow, make suggestions and be active participants.
What do you envision for the future of NDBIB? Can you share your plans to sail through the economic challenges and foster growth?
We have a bullish outlook for our offshore funding, and post-IMF, we expect to bring a few transactions that previously were put on hold, back to the table. Also, there are a few changes in regulation that have helped us work quite aggressively on a few Sharia-compliant products that we hope to bring to the market.
It will be a challenging journey, but as macroeconomic indicators progressively improve, so will the ability for transactions to take place in Sri Lanka. We will continue to look outward at markets like Bangladesh, where we have a strong position already and Southeast Asia, through collaboration and moving into becoming a more regional-based investment banking solutions provider.