Norwegian Development Finance Institution (Norfund), which is owned and funded by the Norwegian government, yesterday entered into an agreement with Sri Lanka’s National Development Bank PLC (NDB) to invest up to 9.99 percent stake in the bank.
Under this agreement, Norfund will participate in the rights Issue for Rs.8 billion that NDB has already announced by way of subscribing to unsubscribed rights and also by way of a private placement if required.
This investment is subject to other conditions, including regulator and shareholders approvals.
This is Norfund’s first equity investment in Sri Lanka and the second investment in the country.
It is interesting to note that Norfund’s investment comes at a time when international rating agencies have downgraded Sri Lanka’s sovereign rating.
“Norfund’s decision to invest in NDB shows the confidence they have in NDB and the Sri Lankan Economy,” NDB Chairman Eshana De Silva said.
Group CEO of NDB Bank Dimantha Seneviratne commented: “We are extremely happy to have the opportunity of partnering with a DFI such as Norfund as it seeks to support the SME sector in reviving our economy.”
“The values Norfund will bring in terms of technical assistance, long term funding, know-how etc. will help the bank and the country overcome the current challenges. As NDB strives to improve financial inclusion by promoting digital technologies, Norfund can make available its experience and technical assistance to help NDB improve in this area. Further on the back of the numerous global awards the bank has received in the recent past, this was a further endorsement of NDB’s strong sustainable growth model and our close alignment to global standards,” he added.
The equity investment by Norfund is the first foreign equity placement agreement for NDB bank. This will increase its foreign shareholding percentage to around 21 percent.
The private placement is priced at a 10 percent premium to the rights issue at Rs.82.5 per share. This equity infusion together with the proposed rights issue will help buttress the Tier I capital of NDB bank enabling it to continue its growth momentum and support the economic revival in a post COVID environment.
“Sri Lanka was added to Norfund’s list of mandated countries in 2019. NDB is Norfund’s first equity investment in Sri Lanka and the second investment in the country. I believe that this is a good indication of the faith and trust Norfund has placed on the Sri Lankan private sector, and I hope it conveys a positive message to other potential investors in Sri Lanka, in particular in this challenging time,” Norwegian Ambassador to Sri Lanka Trine Jøranli Eskedal said.
Norfund Regional Director for Asia, Fay Chetnakarnkul commented: “Financial inclusion is critical to support economic growth, job creation and reduce poverty in Sri Lanka. Norfund is pleased to support NDB’s growth strategy that targets small and medium-sized businesses. This is aligned with Norfund’s mandate. We recognize and appreciate that NDB has a strong management team and a competent board who share our value in upholding high environmental, social and governance standards.”