CSE wants companies to enter bourse via PE route

„„By Shabiya Ali Ahlam Businesses should opt to enter the Colombo bourse through the private equity (PE) route so that the capital market will have the right mix of companies, which would allow investors to reap benefits as expected, expressed Colombo Stock Exchange (CSE) Chairman Vajira Kulatilaka recently. Noting that the country is in need of venture capital, PE and listing, he stressed the latter alone is not enough to uplift the market. “PE as a whole is a very important business for the country. However, you go on SME boards it is not good enough.

There are a lot of businesses that require PE as it requires knowledge and guidance. Without this we will continue to have half cut diamonds in the market and that is not good for the bourse. PE is the better route to follow,” said Kulatilaka.He stressed that companies should only choose to go public when they are fully ready and the confidence for the same can be gained if the entities opted to enter after having utilised the PE option.

PE is a business that is between venture capital and going public. In Sri Lanka the PE route is yet to be actively taken up by the majority of the businesses. Instead they choose to directly enter the stock market. “Good businesses have reach-out for equity and boost growth prospects rather than keeping it to themselves.

They have to be open to share with someone else the success and failure. Human nature is to keep everything to oneself. What they don’t realise is that they are compromising on their growth prospects,” said Kulatilaka. The CSE chief opined that for PE to pick up in Sri Lanka a cultural change is essential as a majority of the businesses have a closed mind-set and are not open to embracing new ideas, methods and approaches. However, he shared that newer generation of entrepreneurs are more open to the PE option.

Increasing numbers of business led by young leaders in Sri Lanka are observed to be reaching out for PE funds to expand their business in a controlled manner. Traditional entrepreneurs are yet to keep up. Expressing confidence in the country witnessing improvements in the PE area in the near future, Kulatilaka said: “The pickup is happening. Once you start it, it will happen. Business will need to have breathing space to make decisions. We need to actively educate business that this option is available. This should be brought in as a culture and no sooner that happens, improvement will be witnessed.” For this he stressed PE firms have to be very patient and have tolerance. “Benefits cannot be reaped overnight.

This has to be understood and communicated. It is essential for fund managers to think long term in this regard,” he added. Sri Lanka’s largest PE fund of US $ 50 million was launched in December 2014 by NDB Capital Holdings PLC in partnership with Zephyr Management, a global private equity specialist based in New York. Kulatilaka, who is also the chief of NDB Capital Holding, shared that a pipeline of good businesses have been identified and investing will take place in the immediate future.