Spike in capital raising activities expected next year

• Rating agency official says receiving increased inquiries seeking new credit ratings
• Concessions announced in Budget 2021 for new CSE listings may be  also fueling interest 

A rating agency official who declined to be named said they are receiving a considerable number of applications seeking new credit ratings, in an indication that coming year could see an influx of companies wanting to raise money either through equity or debt. 

This development signals that the country’s capital market is bracing up for a busy year ahead for equity and debt issues by existing companies as well as from new ones seeking fresh listings, buoyed by the positive momentum in the Colombo Stock Exchange and the better than expected performance in the economy as seen from the third quarter recovery in the gross domestic product.

Policy consistency and political stability act as key underpinnings of this development and perhaps the tax concession offered by the budget for companies seeking listings on the Colombo Stock Exchange in 2021 may have added a flywheel to the enthusiasm. 

The Budget 2021 announced a 50 percent tax concession for companies that will file for listings before December 2021 and tax them at 14 percent each in the subsequent two years to encourage companies to seek listings as part of the broader capital market development plan by the incumbent government.

In any case, the capital market and the broader economy is expected to fare well starting from 2021, particularly with the country re-opening for tourism in the early part of next year. In a possible hint, Fitch Ratings recently said they expect some smaller banks to raise capital in 2021 to reach their minimum capital level of Rs.20 billion, ahead of the extended regulatory deadline by end-2022.

Cargills Bank is expected to hit the market next year as they deferred their plans this year due to the pandemic. 
In an earlier instance, a capital market official said a few technology companies led by a large technology firm could file for an Initial Public Offering next year. 

Several key State-owned enterprises could also see their entry into the market as the government remains conscious of the need to enhance efficiency and put checks and balances into their activities.