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Wednesday December 1st, 2021

Sri Lanka’s Sarvodaya Development Finance eyes billion rupee IPO

ECONOMYNEXT – Sarvodaya Development Finance (SDF), a Sri Lanka-based lender for grass root small and medium enterprises, has kicked off its initial public offering (IPO) to raise 1 billion rupees through selling a 30 percent stake of the company.

SDF, which caters to bottom of the pyramid society through over 5,600 community-based organizations called Sarvodaya Societies, has already pitched for its IPO.

The over 9-billion-rupee total asset worth company has decided to sell a 30.38 percent stake or 45,454,546 shares in the IPO at 22 rupees each in its Colombo Stock Exchange listing.

That will allow the public to buy 1 billion rupees worth of stake in the company at the time of IPO.

The SDF was originally started to create a rural-area centric business to keep the savings of rural depositors in the same area and to serve needy entrepreneurs.

“After the IPO, we will go for some international credit lines. That is our future. There is a huge appetite for impact investment,” Channa de Silva, chairman of SDF said.

“When you are listed, it is easy to go for a new credit line with transparency.”   

He also said 50 percent tax reduction and the market appetite for shares also prompted the SDF to get listed.   

The company’s main business is micro financing to Sri Lanka’s mostly informal agricultural sector across the island including war ravaged Northern and Eastern provinces.

The company started three decades ago and over 80 percent of its lending are based in villages predominantly for agriculture and agriculture-related business.  

It also has loan portfolios in leasing, asset-backed lending, SME lending, housing loans, and society loans in a range of products including construction and manufacturing.

“We are now on the verge of trying to develop an online platform for village business as a next step and through that village entrepreneurs will be connected to the market,” de Silva said.

As of now, 52 percent of the SDF is owned by Sarvodaya Economic Enterprises Development Services (SEEDS) Limited, 22 percent by Sarvodaya related entities, and 13 percent each by Japanese Gentosha Total Asset Consulting Inc. and other existing shareholders.

The SDF has 30 branches and 21 service centers island wide and its profit after tax in the past four years (2018/2021) has shown a growth of 23.4 percent calculated on a three-year compounded annual growth rate (CGAR).

The profit after tax in the last financial year ended on March 31 rose 80.3 percent year-on-year to 183.4 million rupees, the company data showed. 

The total asset and equity also have expanded at 12.4 percent and 24.5 percent compiled on the same three-year CGAR basis.

The loan growth, which was at 2.76 billion in 2016 had almost tripled in the last financial year ended in March 31, 2021 to 7.9 billion rupees. 

It also had a total deposit of 4.55 billion rupees from customers by the end of 2018/19 financial year. 

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