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Tuesday February 27th, 2024

Tushan and Minoli Wickramasinghe on building Capital Trust Holdings

Tushan, Chairman and Chief Executive Officer of Capital Trust Holdings Group and Minoli, Managing Director and Head of the Real Estate cluster

Power couple Tushan and Minoli Wickramasinghe explain how foresight and meticulous research led to the founding of Capital Trust Holdings Group of Companies and its transformation into a powerhouse in financial services, real estate, education, information technology and packaging, now shaping its future. Tushan is Chairman and Chief Executive Officer of Capital Trust Holdings Group and Minoli is Managing Director and Head of the Real Estate cluster. They are the sole shareholders.

Can you take us through the evolution of Capital Trust Holdings to become the powerhouse it is today across Financial Services, Real Estate, Education, Information Technology and Packaging?

Tushan: It all started in 2003 when Ishara Nanayakkara and I bought a small stockbroking firm which within the first six months, was ranked number one in terms of turnover. From 2003 to 2014, it was a leading stockbroking firm in terms of local brokerage turnover. In the first quarter 2021/22 period, we again reached the number one spot.

Our expansion happened in 2011, where we ventured into real estate through Capital Trust Properties, with Minoli heading the cluster of companies. It has evolved into the largest property brokering company in the country, entailing partnerships with three global brands – CBRE, Colliers and Knight Frank. Capital Trust Properties is well known for its team of experts and professionals providing solutions across the full spectrum of the real estate and property market. Capital Trust Properties also has seven other companies under its umbrella, with impressive properties and prime lands in their portfolios.

With equities not doing too well in the January 2015-June 2020 period, we ventured into real estate development, commencing with Capital Trust Residencies. We constructed luxury apartment complexes in Vajira Road, Thimbirigasaya Road and Kotte Road, Ethul Kotte. These boutiques properties won several accolades from the Property Guru Asia Pacific Awards for Best Boutique Developer, Best Condominium Development, Mid-End Condo and Best Affordable Condo categories.

Minoli: In 2015 we started to diversify. We correctly forecast that interest rates, taxation, and depreciation of the Sri Lankan rupee would rise, and that popular stocks would decline more than 40% from the 2015 to 2020 period in dollar terms. We also forecast that real estate could generate more than 100% returns. We invested in land and properties in Colombo which generated a return of over 200% between 2015 and 2017.

Once again from August 2020, after witnessing the sharp decline in interest rates, which we expect will continue to remain low over the next couple of years, and our strong confidence in the regulator’s ability to develop the Capital markets, we once more started focusing on the stockbroking business and making investments into the Colombo Stock Market.

We have been empowering clients to make their own decisions in selecting shares, timing the transactions, and placing their own orders. We seem to have contributed to a sustained rally in equities of over 90% from May 2020.

Capital Trust Holdings has wholly-owned subsidiary companies predominantly in the financial sectors, such as eCapital Trust Credit, a licensed margin trading company, Capital Trust Wealth Management, a licensed Fund Management company and Capital Trust Global Markets, a platform to trade in 37 exchanges. We also have the largest flexible packaging manufacturing company in the country, ALFT Packaging and the leading English medium support education institute in Colombo – Shakthi Institute, which has been producing excellent results for over 25-years.

How are you unlocking growth opportunities in a challenging economy post-Covid?

Minoli: We embraced technology as a path out of the crisis towards growth and introduced automation across the Group for more efficient, streamlined processes towards enhanced productivity. The technology investments helped us stay alive and propelled us ahead of the rest in the market. The transformation was seamless because we have flat structures across the group and no bureaucracy. We engage with a large number of investors at a time online, via webinars and we completely changed our approach to working from home with virtual rooms. We even acquired two tech companies to unlock emerging opportunities.

With the government easing interest rates, the best ever opportunities were created for equities. So, we strengthened certain parts of the group, including creating probably the best and most reliable equity research team, who have generated highly accurate forecasts on earnings of listed companies following in-depth and comprehensive fundamental analysis. They keep clients well informed of Economic, Sector and Company developments and empower clients to make their own investment decisions without being dependent on others.

Tushan: We have to adapt to volatile circumstances and uncertainty, and create opportunities. The government eased interest rates to stimulate the economy in the face of unprecedented economic challenges in the wake of Covid-19. The one-year Treasury bill rate fell sharply from about 11.8% in November 2018 to about 5.25%. As a result, there is a continuous flight of liquidity from banks and finance companies into equities because fixed deposits mature every day. We are confident deposit rates will remain low, at least for another year, giving equities the opportunity to remain buoyant. But of course, you need to pick the right stocks; well-governed companies with attractive valuations, while also timing your transactions correctly. Stock selectivity is key and is what will generate superior outperformance for investors. The stock recommendations that our research team generate are based on robust fundamental screening with the objective of delivering healthy returns for our clients, taking into consideration a complete market cycle.

We also anticipated the currency would weaken and our research teams continuously advocated to investors to buy and hold listed companies with dollarized assets and dollarized income. Some listed companies will also benefit from the import restrictions because they can sell everything they produce effortlessly in the next two to three years. Furthermore, we find that hundreds of billions of rupees are being printed this year in addition to last year, reducing the value of the currency and eroding people’s purchasing power. So, people need to look at investing in properties or in equities with higher exposure in real estate and dollarized assets. If someone had invested in shares, we had recommended in company research reports, they need not worry about the rupee depreciating and purchasing power eroding and in fact would have made a profit of over 100% year to date.

What do you envision for the group’s sustainability and what are the areas in which you are looking for expansion?

Tushan: There seems to be over Rs700 billion in fixed deposits providing negative real returns. We want to empower 500,000 local investors in the next three years, using technology to make correct decisions and place their orders independently in the stock market.

Minoli: Capital markets and property markets don’t always do well. Therefore, to ensure sustainability we created a holding company, diversifying into growth sectors to give our clients and employees sustainable returns, as well as security. If capital markets slow down, then the real estate market starts to perform, when the real estate market also slows down, then we are ready to operate on the global markets platform, trading on 37 major stock exchanges in the world, which is however only for those who have foreign currency.

Tushan: When all markets are not doing well, the education sector continues to do well. Shakthi Institute has probably the highest number of students doing online classes. We are exploring further opportunities to set up a school, given the growing demand for affordable education in the English medium for local exams. We have some of the best lecturers in the English medium, so it is an opportunity to harness this potential. Above all, we have been engaged in the education sector for the last 25 years, as a service, producing some of the best results in the island.

Minoli: The development of the Colombo Port City will unlock new opportunities for both real estate and capital markets, which will take off as Sri Lanka transitions into a regional financial hub. Real estate, in particular, can only trend upwards from now onwards. We are looking at opportunities with local and foreign partners.

How do you manage the often conflicting roles of keeping an eye on the day-to-day affairs of the business while focusing on the future?

Tushan: Day to day activities have been a challenge after the Easter Sunday attacks, and Covid-19 made matters worse. However, despite all the disruptions, you need to have an eye on the future and have a forward-looking strategy, or you would never grow. We have a long term strategy in place, and we can pivot quickly depending on evolving trends.

Minoli: We hope to be of service to the country by delivering high-quality education that encourages critical thinking and creativity, departing from the rote-based system we have today.

What is the boldest decision you have ever made?

Tushan: There are many! The first was to acquire an 80% stake in a stockbroking firm and then shoulder the temporary advancing funds for CDS settlements personally. Later, when the equities market was in a prolonged tailspin, we decided not to close our offices at CSE branches. Another bold decision was to diversify into real estate and property in 2014. In 2015, we decided to sell most of our stock investments and convert them into land and property and after that, we made the decision to develop three office buildings. We also built three apartment complexes, all of which won the Asia Pacific Property Guru Awards in 2017 and 2018. However, we paused from 2018 to 2021 and decided not to develop on five lands bought for apartment construction. Had we commenced building, we would be struggling today with the Covid pandemic, import restrictions and escalating material and labour costs.

Minoli: We have always taken calculated risks after doing the research and market analysis. We made a bold decision to invest in shares of listed companies that would gain from the currency depreciation and declining purchasing power of the rupee which we had forecast. We first undertook an extensive fundamental analysis and researched the stocks we had picked to ensure the companies were well managed, had sound governance structures, satisfactory financial ratios, and strong earnings growth prospects, before recommending these stocks to our clients.

Tushan: Looking at what happened in previous years, we want to make sure that clients don’t stray away from our recommendations and speculate on their own. We want them to have fundamentally strong shares which will continuously rise and maximize their wealth and we are duty-bound and determined to empower them with fundamental analysis and technical analysis so that they can decide what and when to buy and sell. To serve this purpose, Capital Trust Research offers a series of webinars where we host videos on our YouTube channel.