Issuer Booklet Option 24jun13

A guide to listing on the
Colombo
Stock Exchange
Introduction
nviting public ownership into your company demonstrates your commitment to the highest standards of
corporate governance and transparency. This, in turn, helps enhance the growth trajectory of your company
through multiple mechanisms. Access to a deep pool of international/domestic capital and facilitated
strategic partnerships are but two of the myriad benefits you could gain through a public listing.
The Colombo Stock Exchange (CSE) is committed to ensuring it is the preferred choice of value and wealth
creation for both listed entities and investors. Together with the regulatory authority, the Securities Exchange
Commission (SEC), the CSE continues to ensure an appropriately regulated, transparent and liquid market that
operates to benefit all stake holders. Furthermore, recognizing the inherent advantages of efficient and welldeveloped capital markets, the Sri Lankan government is enacting a number of measures to further incentivize
all market participants and foster growth.
This benign environment, as well as the post-war surge in economic growth, has helped establish the CSE as
one of the best performing markets regionally and globally since 2009. The CSE continues to attract significant
foreign capital with the result that fundamentally strong companies are rewarded with higher valuations. Yet, there
is further room for growth; the current market capitalization to GDP ratio is only 30%, compared to a regional
average of 48%. The measures undertaken currently should help the CSE scale up towards the average in the
medium term.
Obtaining a public listing is a major milestone in the life of a company and the decision to list, which may well be
the most significant business decision you make, is one that must be initiated only after careful assessment of
all relevant factors. Through this booklet, we hope to guide you through the journey of listing and to provide you
with a glimpse of what life is likely to be as a public company.
We hope you find this booklet useful and wish you success in your new venture.
Page 1
Contents
A Listing on the CSE: A Mark of Distinction...............................................................................................5
Rewarding excellence in large and small companies..................................................................................................7
LKR157bn raised in debt and equity capital over the past five years..........................................................................9
Further listings an important source of funding......................................................................................................... 10
Three IPO-backed Success Stories........................................................................................................13

Odel A Stunning Makeover..................................................................................................................................... 15
Hemas The Transformation into a Conglomerate.................................................................................................. 16
LAUGFS Leveraging Stability for Growth............................................................................................................... 17
Frequently Asked Questions....................................................................................................................21

Going Public: Pre-considerations...........................................................................................................28
Advantages of a public listing.................................................................................................................................... 31
Concerns you may have........................................................................................................................................... 34
Is your company ready to go public?........................................................................................................................ 35
Its the Right Time to Go Public: Be a Part of Sri Lankas Growth Story..............................................39
Sri Lanka South Asias fastest-growing economy.................................................................................................. 41
Strong fundamentals underlie higher growth trajectory of CSE indices.................................................................... 41
The governments 2013 budget introduced measures to stimulate capital market growth....................................... 46
Debt An Emerging Listing Option.........................................................................................................49

Overview of the Corporate Debt Market.................................................................................................................... 51
Advantages of a Debt Listing.................................................................................................................................... 55
The IPO Process........................................................................................................................................59

Eligibility for Listing.................................................................................................................................................... 61
Preparing for an IPO................................................................................................................................................. 62
Parties Involved in a Listing...................................................................................................................................... 64
The IPO Process....................................................................................................................................................... 65
The Costs of Listing.................................................................................................................................................. 66
The Regulatory and Legal Framework...................................................................................................................... 67
The role of the SEC and the CSE....................................................................................................................................67
Legal/regulatory requirements to be considered..............................................................................................................67
Accounting requirements to be considered......................................................................................................................68
Life as a Listed Entity.................................................................................................................................71

Regulatory requirements........................................................................................................................................... 73
A Listing on the CSE:
A Mark of Distinction
A Listing on the CSE A Mark of Distinction
ome to 287 companies as at 15th May 2013, with a combined market capitalization of about USD19bn
(LKR2,400bn), the Colombo Stock Exchange (CSE) is one of the regions most dynamic stock exchanges. The
Sri Lankan capital market continues to attract investor attention with long-term performance well exceeding that
of most global and regional indices, which in turn provides companies an opportunity to access a deep pool of
international and domestic capital. Furthermore, a listing on the CSE is a hallmark of prestige an affirmation of a companys
commitment towards ensuring the highest standards of corporate governance and transparency.
Rewarding excellence in large and small companies

At the CSE, there is a place for all entrepreneurial companies that aim to be the best in their respective fields the organizations
size is irrelevant. The Main Board is for larger corporates, familiar names such as John Keells, Ceylon Tobacco, Nestle and
Commercial Bank are listed here. Equally well-known names such as Odel, LAUGFS, and Vallibel One are found in the
alternate Diri Savi Board. In fact, 57 of the total 287 companies listed on the CSE are listed on the Diri Savi Board, with
market capitalizations ranging between LKR316m and LKR30bn.
Exhibit 1: Some of the names seen on both Boards
Market Capitalization (LKR.Bn)
(15-May-13)
Board
Issuer
Listed Year
Sector
Main
John Keells Holdings Plc
1986
Diversified Holdings
235.1
Main
Ceylon Tobacco Company Plc
1955
Beverage, Food and Tobacco
155.5
Main
Nestle Lanka Plc
1983
Beverage, Food and Tobacco
101.4
Diri Savi
Vallibel One Plc
2011
Diri Savi
Laugfs Gas Plc
2010
Power & Energy
9.0
Diri Savi
Odel Plc
2010
Footwear & Textiles
6.6
21.7
Source: Colombo Stock Exchange
Following the rejuvenation of the capital market in post-war Sri Lanka, the CSE has witnessed a significant increase in the
number of listings. Large conglomerates such as Vallibel One, Softlogic Holdings, and Expolanka Holdings raised equity whilst
financial institutions such as Sampath Bank and Seylan Bank carried out public listings of debt securities.
Page 7
Exhibit 2: Recent listings
Exhibit 4: IPOs predominated during 2010 12
Laugfs Gas
2010
Power & Energy
Equity
2,505
Expolanka Holdings
2011
Equity
2,408
Sampath Bank Plc.
2012
Banks, Finance & Insurance
Debt
1,500
Seylan Bank Plc.
2013
Debt
2,000
Services
7,020
Footwear &
textile
Equity
Construction
and engineering
Manufacturing
2011
Land & property
Peoples Leasing& Finance Company
6
5
4
3
2
1
0
Information
technology
Funds Raised (LKR. m)
Hotels & travel
Equity/ Debt
Beverage, food
& tobacco
Sector
Power and
energy
Listed Year
Diversified
holdings
Issuer

Note: Does not include the financial sector since most were listed through Introductions
In total, 34 companies listed either equity or debt in 2011, as did 23 in 2012. The majority of these entities operate in
high-growth sectors such as hotels and travels, construction and engineering, power and energy, and manufacturing. In
2010, the Central Bank of Sri Lanka (CBSL) mandated a public listing for all Finance Companies in order to promote good
governance and supervisory oversight of these institutions. Following this rule during the 2010-12 period, 26 Licensed
Finance Companies listed on the CSE.
Exhibit 3: Over 80 listings on the CSE since 2008
LKR157bn raised in debt and equity capital over the past five years
Since 2008, the CSE has supported the raising of around LKR157bn in debt and equity, through primary and further listings.
Spectacular growth was reported in both 2010 and 2011, with total funds raised increasing to a record LKR60.5bn in 2011.
This positive momentum continued in 2012, albeit at a slower pace, given the sluggish economic conditions worldwide. A
total of LKR29.5bn was raised in 2012.
Exhibit 5: Fundraising at the CSE gaining momentum
No. of new listings

25
LKR Bn
20
20
14
15
10
14
10
6
5
0
50
2
2008
30
1
2009
2010
IPOs
40.3
40
2011
25.2
19.3
20
2012
Introductions
10
7.0
5.1
2008
20.2
14.2 15.3
8.4
2.3
2009
Initial listings
2010
2011
2012
Further listings

Page 8
Page 9
Further listings an important source of funding

Listed entities returning to the capital markets (further issues and private placements, etc.) accounted for a significant
proportion of total capital raised. About LKR15.3bn was raised through further listings in 2012, providing a clear indication of
the ongoing benefits of going public.
Corporate debt issue gaining in viability

The relatively higher cost was one of the factors that had previously deterred companies from issuing listed debt securities,
constraining the growth of the Sri Lankan corporate debt market. With the aim of growing the corporate bond market to
USD10bn by 2016 from less than USD1bn presently, the government now offers incentives to promote corporate debt
listings. Measures such as removing income tax and withholding tax on interest earned on new publicly issued debt listed
after the 1st of January 2013 (previously 10%) are helping debt gain popularity as an investment option. This is in turn
helping to make the issue of publicly listed debt a more viable option for corporates. As a result, capital raised through debt
issues soared to LKR10.5bn by end April 2013, compared to LKR12.5bn in 2012, and LKR1.0bn in 2011.
Exhibit 6: LKR12.5bn worth of debentures issued in 2012
LKR Bn
25
19.2
20
15.0
15
12.5
10
5.5
5
0
1.5
2008
4.3
1.2
1.1
2009
1.0
2010
Equity-IPO
2011
1.7
2012
Debt-IPO
Page 10
Three IPO-backed
Success Stories
Odel A Stunning Makeover

Odel management recalls the listing decision
ODELs eventful journey is a story of how a family business grew from a single store to a large company that currently
operates 17 stores, tripled in market size, and enabled its original shareholders to increase their overall wealth.
In 1989, the companys CEO Otara Gunawardena founded ODEL by selling export excess garments from the boot of her car.
After gradual growth over the next two decades, in 2009, using internal cash flows, additional equity injection from owners,
and bank debt, ODEL embarked on a rapid expansion spree and increased its number of stores to 12. With the intention
of raising equity for further growth, the company instigated the process of a public offering and in August 2010, ODEL was
listed on the CSE. The company offered 11.5% of its shares to the public at LKR15 per share for a listing of LKR250.5m.
ODELs shares were oversubscribed 63.8x, the highest ever over-subscription recorded at the CSE, and the companys
shares opened trading on the aftermarket at LKR30 per share.
Exhibit 7: Market capitalization and NAV (LKR m)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Exhibit 8: Revenue and gross profit (LKR m):

FY2009-FY2012
5,000
4,000
3,000
2,000
1,000
At Listing as at 4
August 2010
Net Asset Value (LKR m)

Source: Bloomberg
1 year from
listing
As at 31
December 2012
Market Capitalization (LKR m)
FY2009
FY2010
Revenue
FY2011
FY2012
Gross Profit
Source: Company reports
The management believes that pricing the IPO at LKR15/share ensured that there was something left on the table for
investors, and that this helped to increase the companys share price significantly in the aftermarket, leading to a highly
successful IPO. As aftermarket trading carried the share price up to highs of LKR43-44, the owners stake received a
significant boost in value in spite of the reduction in their shareholding percentage. From owning 100% of a company with a
net asset value of LKR1.5bn, the Gunawardena family went on to own 84.3% of the listed company valued at LKR4.7bn, an
almost threefold increase in their net worth. ODEL utilized part of the proceeds to increase its store numbers by 25% to 15
and the floor area by to over 140,000 ft, leading to a sales growth of 37% and a 43% growth in gross profit over FY2010FY2011. ODEL also added private-label brands LUV SL and Backstage at several stores in premium city locations.
To facilitate its next phase of growth, ODELs senior management and majority shareholders decided to dilute their personal
holding and enter a tie-up with an international retail player. The controlling shareholders sold a 41.8% stake to Parkson
Retail Asia Pvt Ltd for LKR1.4bn. Parkson Retail Asia owns and operates 52 department stores in Southeast Asia and
Parkson Retail Group, a related entity, a further 49 stores in 31 major cities in China. This transaction was followed by a 1:1
rights issue that raised LKR2.9bn, with the majority shareholders all taking up their full allocation.
By taking the bold step of yielding control, management increased the companys potential to extend and grow the ODEL
brand, realized a part of their investment at a significant yield, and simultaneously increased the value of their holding in
the company. Presently, the Gunawardena familys 44.6% stake in ODEL is valued at about LKR3bn, more than double the
value of their original holding before the IPO three years ago.
Page 15
Hemas The Transformation into a Conglomerate
LAUGFS Leveraging Stability for Growth
Hemas CEO Husein Esufally recalls the journey so far
Management believes timely listing paved the way towards sustainable growth
At the time of its listing in 2003, Hemas Holdings PLC (Hemas) had been in existence for over half a century. The groups
success story provides an engaging example of how conversion to a publicly listed company enhances the profile of the
organization and its owners, facilitates succession planning, and sets the stage for accelerated growth.
LAUGFS Gas PLC (LAUGFS) is a success story of innovation and strategic positioning to benefit from emerging
opportunities. It is also a story of how the adroit use of a public listing helped stabilize a rapidly growing company, and how
the company used that stability as a foundation for further growth and diversification.
Hemas was founded in 1948 as Hemas (Drugs) Ltd. In the decades that followed the Hemas expanded in to diverse
businesses including travel and tourism, exports, industrials and apparel manufacture. A reorganization and consolidation of
the business activities in the 1990s led to the formation of Hemas Holdings as the parent company under which the FMCG,
Healthcare, Leisure, Transportation and Power sectors are organized.
LAUGFS was established as Gas Auto Lanka Pvt Ltd, an auto gas conversion company that pioneered the use of
liquefied petroleum gas (LPG) as an economical alternative fuel for petrol-driven vehicles. This humble yet profitable
business set the stage for management to position the company as a competitor to global giant Shell, following the
liberalization of Sri Lankas LPG industry in 2001. Over the years that followed, the company expanded rapidly and
acquired significant market share in all segments of the downstream LPG business: domestic LPG, auto gas, and
industrial LPG.
Exhibit 9: Revenue and gross profit (LKR m):

FY2003-FY2012
Exhibit 10: H
emas share price chart (LKR):
FY2003-FY2013
To support growth in its gas business, the company established an LPG storage facility, a cylinder filling plant and an
island wide distributor network, all of which led to accelerating revenue and profit growth; LAUGFS reported an operating
profit of LKR527m in 2010. The company also initiated diversification into other businesses such as leisure and property.
The downside of such rapid growth was the escalation of debt to LKR1.7bn, and debt/equity ratio to 60%.
Hemas Holdings Price Chart (LKR): From listing date March 2013
25,000
60
20,000
50
15,000
10,000
Exhibit 11: Market capitalization and NAV (LKR m)
40
5,000
30
15,000
Revenue
Gross Profit
FY2012
FY2011
FY2010
FY2009
FY2008
FY2007
FY2006
FY2005
FY2004
FY2003
20
10
10,000
10,000
1,200
8,000
1,000
800
6,000
0
Oct-03 Jul-04 Mar-05 Nov-05 Jul-06 Mar-07 Nov-07 Jul-08 Mar-09 Nov-09 Jul-10 Mar-11 Nov-11 Jul-12 Mar-13
600
4,000
5,000
Source: Bloomberg
Exhibit 12: Revenue, operating profit (LKR m):

FY2010-FY2012
Source: Bloomberg
400
2,000
The shareholders decided to obtain a public listing for the group in October 2003 with the issue of 8m shares at LKR50/
share. This raised LKR400m to help fund its entry into the power sector and existing shareholders also realized part of
their stake by selling 4m shares for LKR200m. The public listing served many purposes: firstly it gave the shares an
objective valuation and created liquidity in the shares to enable an orderly exit for existing shareholders. This helped
Hemas to grow as a Group, and prevented fragmentation. A secondary, but equally important, objective was to bring
in fresh senior management into the company, as part of the groups process of succession planning. Finally, the IPO
initiated access to capital markets; the Group subsequently returned to the market to raise funds to list Hemas Power Plc
which raised LKR626m in September 2009.
As a public company, the groups revenue increased fourfold to about LKR21bn in 2012 from around LKR5bn in 2003 and
profitability threefold to over LKR1.3bn. As of March 2012, the Esufally family held a stake of about 72% and institutional
investors around 12%. The ESOP schemes further facilitated the entry of high quality managers into the group. Today,
Hemas is one of the largest conglomerates in the country.
At Listing as at 8
December 2010
Net Asset Value
Source: Bloomberg
1 year from
listing
As at 18
February 2013
Market Capitalization
200
FY2010
Revenue
FY2011
FY2012
Operating Profit
Source: Company reports
Management decided to carry out a public listing of the company in 2010, with dual objectives of funding growth and
reducing its debt burden. LAUGFS Gas PLC listed on the Diri Savi Board to raise LKR2.5bn. The company issued 75m
ordinary shares at LKR23 per share and 52m non-voting shares at LKR15 per share. The LAUGFS IPO set a record
for the largest ever retail participation for an issue, with over 60,000 applications received and resulted in the issue
being oversubscribed by about 22x. The market attributed a capitalization of LKR8.9bn to the company over an NAV
of LKR6bn.
LAUGFS used part of the proceeds to pay down around LKR1bn of debt. The remainder was used to expand and diversify.
The company spent LKR500m on the LPG segment; the leisure segment received LKR500m to construct a four-star, 100room hotel in Chilaw; two star class hotels in the Eastern and Southern coasts are also on the drawing board. LKR425m
went to the property development segment to build 72 serviced apartments in Colombo 6.
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Page 17
In the first full year after listing, the company posted a 30% increase in revenue to LKR9.2bn and a 21% growth in
operating profit to LKR968m. Presently, the parent company owns 68% of the listed entity and Sri Lankas Employee
Provident Fund is the second largest shareholder with a 17% stake.
Through an astute decision to list at the right time when the stock market was experiencing significant growth, LAUGFS
was able to bring in external equity to strengthen its balance sheet, consolidate operations in its core businesses, and lay
the foundations for diversification into other lucrative segments accelerating its growth from humble beginnings to the
LKR10bn corporate it is today.
Page 18
Frequently Asked
Questions
Frequently Asked Questions

Will I be able to realize a fair valuation for my company?
he valuation attributed to your company will reflect the current consensus among market participants of risk
associated with it and the growth outlook. Although past performance is not necessarily considered an indicator
of future profitability, a historical track record of consistent revenue and profits would create positive sentiment
and set the stage for an optimistic outlook.
A company may also command a higher valuation when there is an impending change in the outlook for the company/
industry, heralding a significant increase in revenue and earnings. Of course, there should be high certainty of such an
inflection point in the near future. Such companies on the cusp of significant growth and profitability would initially be listed
on the Diri Savi Board where track record requirements are less stringent.
The establishment of the IPO offer price is an iterative process between you, the investment bank managing the listing, and
key investors. After conducting due diligence on your company, the investment bank will carry out a valuation, usually based
on or a combination of several standard methods:

Relative valuation multiples: This approach is often used to value young and high-growth companies with limited
historical accounting information. The value of your company is considered relative to other listed companies in the
industry that are comparable in size and nature. The company is valued on a multiple of the earnings per share generated
(price/earnings) or on enterprise value to earnings before interest, tax, and depreciation and amortization (EV/EBITDA).
Your company would be valued at a premium if it has superior earnings growth potential, competitive advantages,
greater cash flow generating ability, more liquidity, etc., than its peers.
Discounted cash flow valuation: This approach is usually applied to mature companies that generate steady free cash
flow. The company is valued as a sum of forecasted future cash flows discounted back at a rate commensurate with the
cost of capital and risk associated with the company.
Sum of the parts valuation: This method is usually applied to companies that have distinct business segments with
different outlooks for profitability and growth that need to be valued separately. The value of the company would be the
sum of the separate segments minus debt.
Once a valuation has been established, the investment managers would approach potential key investors to get an indication
of the level of interest for price and size. Just as in any other business transaction, the final price would be a mid-point
between your asking price and the investors offer price. To create a win-win situation for all parties and ensure that you will be
enthusiastically welcomed when entering the market, the price should ideally be set at a level at which there is over-subscription
and the share price performs well in the after-market.
Page 23
Will my company be expected to pay regular dividends?

Whether your policy is to pay out dividends or to re-invest in projects that generate returns higher than the cost of equity,
the critical need is to clearly convey your dividend policy to shareholders. The companys ability to pay a regular stream of
dividends is the key factor controlling the dividend decision, and therefore, it is mature companies with steady and predictable
cash flows that usually choose to create shareholder returns via dividends.
Companies in the high-growth phase of the business cycle generally choose to re-invest and create shareholder returns via
share price growth and capital gains. A dividend is usually not expected from such companies; if a company wishes to pay
out a dividend to share the benefits of a specific gain (for example, profit from a disposal of a segment), it could be paid in
the form of a special dividend.
There is no legal requirement to pay out dividends to ordinary shareholders. However, there are certain compelling factors
to consider in determining your companys dividend policy:

Steady dividends usually indicate strong performance and sound management to all stakeholders, including investors,
debtors, suppliers, and the media. A company that pays out a steady growing dividend would be rewarded with a higher
valuation.
Capital gains are influenced by investor sentiment. Hence, in times of share price volatility and low interest rates,
investors may favor steady dividend-paying stocks that provide predictable returns.
What would attract high-quality shareholders to my company at the IPO

and thereafter?
Investors who buy company shares with the intention of participating in the risks and rewards of its long-term growth would be
considered high-quality shareholders. These investors usually include institutional investors (for example, asset managers,
pension funds, long-only hedge funds, and insurance companies) and strategic stake holders. Their investment horizons are
usually a few years, in contrast to the hours/days investment horizons of day-traders and short-term investors.
High-quality shareholders usually focus on factors that drive a companys strategic direction and long-term growth. They
look for businesses with competitive advantages in their industry, and potential to derive strong growth using that advantage.
Another key attribute these investors look for is stable management focused on investing in projects that generate returns
higher than cost of capital. There are several other factors that could attract such an investor:

Innovation
Super-normal growth
Price/Volume leadership
Strong cash generation
High-return ratios (ROA/ROE) compared with its peers
Steady dividends
In terms of qualitative criteria, high-quality shareholders prefer:
Will the share price fall if my company misses earnings estimates?

Market participants form expectations of future earnings based on industry conditions and the business prospects companies
disclose during regular investor updates. Estimates formed by sell-side analysts (research analysts at investment banks/
brokerage houses) are widely disseminated, and a summary of these forecasts are collated into consensus estimates.
Exceeding these estimates usually causes a surge in the share price, while minor misses are rarely disastrous since
seasoned investors understand cyclical variations in business. At the same time frequent missed estimates do establish
a negative precedent that could adversely affect the share price. It is un-communicated declines in earnings that surprise
investors and precipitate share price collapses.
Companies can mitigate the risk of such an occurrence by:

Attracting shareholders with long-term investment horizons who are less swayed by temporary blips in results. Shortterm investors are usually sentiment-driven, and a larger proportion of such shareholders create undue pressure on
managers to focus on meeting or beating estimates, often at the expense of strategies beneficial to the company in the
long run.
Establishing a policy of honest and transparent disclosure to shareholders. Whenever management identifies a risk
of missing earnings targets, it should immediately convey that information to shareholders and outline the steps being
taken to rectify the situation. This will earn the trust of the investment community, and, in turn, result in markets accepting
the predicted decline with equanimity.
Page 24
Management with a proven track record and substantial equity interest in the company
Brand leadership in business segments
A defined corporate strategy and business plan
Is it correct to consider that there is no cost to equity?

There is a widely-held misconception that equity is equivalent to zero-cost debt. In fact, the cost of equity is usually greater
than the cost of debt as an equity investor demands an additional premium to account for the risk of holding the share instead
of debt that generates defined and certain interest payments.
The return a shareholder expects is the companys cost of equity and is reflected in the valuation of the company. We can
illustrate this using an example: Company A has a share price equal to 10x net profit per share (EPS) while its peer company
B trades at 15x EPS. Company A has higher cost of equity than peers, that is, investors believe that holding company As
shares is riskier. The impact of this is practically illustrated at a further listing. To raise the same amount of funds, Company
A would have to issue more shares and suffer greater dilution to EPS.
Page 25
Are there any advantages to a public listing versus a private placement?

Raising equity through a private placement of a stake with a private equity firm or a high net-worth investor is an alternative
to an IPO. However, private placements suffer from several inherent disadvantages relative to a public listing:

Easy entry, difficult exit: A stake sale is certainly much less complicated than the IPO process. However, there are limited
exit options except for a buy-out or an IPO at a later date. An IPO, on the other hand provides a mechanism for orderly
exit of existing shareholders.
A one-time event: A private placement is a one-off event. Fundraising for the next phase of growth requires a repetition
of the same process. On the other hand, an IPO paves the way to a very deep pool of capital, both debt and equity, to
which the company can subsequently return repeatedly for fundraising through a less onerous process.
Low visibility: Private placements do not offer the benefits of increased visibility, investor interest, media coverage etc.,
which a public listing can bring to a company.
Decreased control: Presence on the Board of Directors or involvement in management may be conditions allied with a
private equity placement, unlike in the case of a public listing, where the majority shareholder generally retains control.
What is the relationship between the free float and valuation?

Everything else held equal, the company with greater free float will command a higher valuation than the company
with a lower free float. A low free float leads to a vicious cycle where your company will not fall within the investment
universe of most institutional investors due to the difficulty of entry and exit. This leaves the majority of the companys
public holding in the hands of retail investors, who generally have shorter investment horizons. Asa result, the share
price is subject to high volatility, further discouraging longer-term investors, leading to lower demand for the shares and
hence, a decreased valuation.
Page 26
Going Public:
Pre-considerations
Going Public: Pre-considerations
or some companies, a public listing represents a zenith, the ultimate recognition of their achievements in terms of
growth and prestige; other businesses view an IPO as a necessary evil, to be embarked upon only if unavoidable.
We advocate a more sanguine approach that an IPO should be viewed as a natural step in a companys growth
trajectory, a strategic business decision to be implemented at an opportune moment.
While a public listing confers numerous advantages on a company, it is also essential to consider the potential drawbacks,
since life as a listed company is a paradigm shift a transition from a private existence to life in the public eye. It is also
crucial to critically evaluate if the company itself is ready to be a public entity. Consideration of these issues well ahead of
embarking on the listing process is a prerequisite for the smooth flow and successful conclusion of an IPO.
Advantages of a public listing

Attract long-term capital for growth investments
To go public or not to, that is a question that arises when a company is well-established and is contemplating the next phase
of growth. Being profitable, stable and well reputed by this stage, your company may well be able to access bank debt at
favorable terms; however, the question remains if you should. Fundraising at this stage is for long-term projects: to expand,
diversify, acquire or merge. While bank debt is a low-cost option suitable for working capital purposes, for projects where the
pay-back period is long, it is best to have a mix of equity and long-term debt capital to ease the strain on a balance sheet.
Raising equity through a listing provides a company the ideal option of partnering with a set of capital providers willing to
share in both the risk and reward of the project.
Achieve an optimal capital structure

Using debt as the sole funding source inevitably results in the loss of future financing flexibility resulting in a decline in the
company value. Conversely, an optimal mix of debt and equity in capital structure maximizes a companys value. Raising
equity capital through a listing can help a company achieve this optimal capital structure.
By listing shares on the CSE, a company can gain access to a deep pool of equity from institutional and retail investors, both
domestic and international. Therefore, unlike a private company, the growth of a listed company is not constrained by the
owners capacity to inject capital into the business.
Return to market to fund next phase of growth

Furthermore, it has been our experience that for a successful IPO, and, once listed, for a share price to command a premium
valuation, a company should not view a listing as a one-time event. As seen in the above diagram, management has the
option to access share markets to raise capital throughout the business cycle. A successful listing where the issuer receives
a fair price for the shares and at which the investor generates solid returns, coupled with a good relationship between the
two parties, often translates into the company being able to raise fresh capital for the next phase of growth at later dates at
a higher valuation multiple (through rights issues, further listings and listed debt, etc.). Returning to the market is usually a
speedier and less onerous process.
Page 31
Attract strategic investors
Funding choices through the business cycle
High visibility, transparency, and enhanced liquidity enable a listed company to

attract high-quality shareholders, such as institutional and strategic investors,
on to its shareholder register. Building relationships with such potential strategic
partners helps the company to take on investments beyond the capacity of
internally generated free cash flow, enabling growth at an unprecedented pace
and perhaps in directions not previously envisaged.
Revenues/
Earnings
Revenues
Attribute an objective value to the company

Earnings
A private companys valuation suffers a discount owing to illiquidity and perceived

risks due to the limited availability of information. A listing at the CSE leads
to an independent market valuation of the company. Your companys superior
attributes such as its potential for high growth, revenue and profit generation,
competitive advantage and cash generation ability would likely attract demand
for its shares, resulting in a premium valuation for the company. The higher
valuation, combined with the companys growth through the funds raised,
would in turn enhance the value of your holding. Although your percentage of
ownership in the company is lower than before, the increased valuation for the
entity could likely result in a significant increase in the value of your stake.
Time
External
funding needs
Internal
financing
External
financing
Growth stage
Financing
Transactions
High, but
constrained by
infrastructure
High, relative
to firm value
Negative or
low
Owners Equity
Bank debt
Negative or
low
Venture Capital
Common Stock
Stage 1
Start-up
Accessing private equity
Moderate,
relative to firm
value
Low, relative to
funding needs
Common stock
Warrants
Convertibles
Stage 2
Stage 3
Rapid expansion High growth
Initial public
offering
Declining, as a percentage of
firm value
Low, as
projects dry
up
Align shareholder/management/employee interests

High, relative to funding
needs
More than
funding needs
Debt
Retire debt
Repurchase stock
Stage 4
Mature growth
Stage 5
Decline
Seasoned equity issue
A public listing of shares simplifies and facilitates the process of share-based

remuneration for employees, which can serve to attract and retain talented
staff. Stock-based compensation provides employees an opportunity to share
the benefits of a companys profitability and growth, which in turn helps align
employee interests with that of management and shareholders.
Stimulate liquidity in shares
Bond issues
Source: Aswath Damodaran
Enhance the corporate profile

Companies listed on the CSE receive regular media coverage. International and local financial publications usually cover
each stage of the listing process (announcing intention to float, publishing the prospectus, local/international road shows,
etc.). This heightened awareness of a companys activities, together with the profiling of key shareholders/managers,
provides what is effectively below-the-line advertising, and it enhances a companys visibility, brand image, and prestige.
Once listed, the media covers a companys regular updates to its shareholders, and this helps to improve brand recall among
key stakeholders: customers, suppliers, financial service providers, potential employees, etc.
Page 32
Management of private companies consider private equity/venture capital as

alternatives to an IPO. However, these measures have a prima facie disadvantage
compared to a public listing in that they constrain the liquidity of a companys
shares. Improved liquidity is not only a mechanism to facilitate an orderly
exit/stake sale for existing shareholders; it is also a mandatory requirement
to attract high-quality shareholders with longer investment horizons, enabling
management to instigate measures beneficial to a companys long-term growth.
Alternatively, poor liquidity tends to attract day-traders and short-term investors,
and as a result, the companys share price and valuation become subject to
unwarranted volatility.
Alternative currency for mergers and acquisitions
Advantages
of a public
listing
Attract long-term
capital for growth
investments
Achieve an optimal
capital structure
Return to market to
fund next phase of
growth
Enhance the corporate
profile
Attract strategic
investors
Attribute an objective
value to the company
Align shareholder/
management/
employee interests
Stimulate liquidity in
shares
Alternative currency
for mergers and
acquisitions
A publicly listed company can use its common shares in conjunction with or as an
alternative to additional capital to carry out acquisitions, mergers, or other buyout
activities. This could prove to be a more viable option than using available cash or
raising debt and can facilitate the companys inorganic growth process.
Page 33
Concerns you may have
in the share price, further alienating high-quality investors. Certain companies also invoke other forms of takeover defenses,
such as issuing several classes of shares with different voting rights, etc.
Potential loss of control

Once listed, duties take precedence over rights; controlling shareholders and directors are entrusted with the responsibility
of protecting minority shareholder interests. Does this mean you would be unable to steer the company in the direction of
growth and profitability you would want to? Not at all, in fact, one criterion that high quality shareholders with long-term
investment horizons look for in stock-picking is the continued presence of key shareholders at the helm of the company,
ensuring that its growth momentum is maintained. A private company typically allows in outside shareholders in one of two
ways. The first and less common occurs when existing shareholders monetize their investment at the IPO and completely
exit ownership of the company. This, in our experience, is usually not looked upon favorably by the investment community.
In the second scenario, a minority stake in the company is made available to the public. The companys majority shareholders
continue to exercise day-to-day control over the business and act in a fiduciary capacity towards minority shareholders, who
may or may not be represented by outside directors. What ceding control translates into in practical terms is that you may
require shareholder approval for certain material transactions as required by the Companies Act.
The rewards of ceding a certain amount of control are manifold. Injecting external capital into your business, not only at the
IPO but through returning to the market for judicious investments, could likely facilitate significant gains in your companys
growth trajectory. The presence of strategic investors could lead to business partnerships, tie-ups, mergers, or acquisitions
that are critical to remain competitive. Your companys heightened profile, once listed, would not only increase its standing
and reputation within the industry, but also improve perceptions of your business and financial strength. Delivering strong
shareholder returns and protecting the interests of minority shareholders is usually rewarded by a higher valuation being
attributed to the companys shares, increasing the value of your stake.
Loss of confidentiality
The higher degree of disclosure and transparency required of a public company,
combined with the requirement for regular shareholder communication, raises the
fear of loss of confidentiality. However, this is a misplaced concern as there is no
requirement to disclose trade secrets or confidential information, such as client
identities or potential acquisition targets. On the other hand, educating investors
with generic information for example, the order book size, business pipeline,
pricing potential, and expansion/acquisition plans helps investors to assess
the quality and quantum of future earnings potential. This in turn translates into
increasing demand for the companys shares and a rising share price.
The possibility of a future takeover

Typically, the possibility of being subjected to a takeover bid is a major
argument against ceding control. The possibility of a takeover depends on
the shareholding percentage the original owners retain; the required minimum
public shareholding is 25% of total shares if listed on the Main Board and only
10% of total shares if listed on the Diri Savi Board. However, it is critical to
maintain a sufficiently high free float as limiting share liquidity in order to retain
control leads to a vicious cycle, contrary to company and majority shareholder
interests. A low free-float results in a companys shares being shunned by highquality investors as being too illiquid; this leaves public shareholding in the
hands of short-term, sentiment-driven retail investors and leads to high volatility
Concerns you
may have
Potential loss of control
Loss of confidentiality
The possibility of a future
takeover
Costs of compliance
Costs of listing and
remaining listed
Costs of compliance
A listed company must comply with the legal and regulatory requirements of the CSE and the Securities and Exchange
Commission of Sri Lanka (SEC), including the requirement for regular shareholder communication. As such, a listed company
would likely have to allocate additional management time and invest in establishing reporting systems and compliance
procedures. These regulatory requirements are a hallmark of developed markets and are in place to ensure the protection of
interests of all parties engaging in the share market transaction, including issuers and investors. Rather than viewing these as
an onerous process, we advocate considering adherence to these requirements as it provides an opportunity to implement and
streamline transparent procedures and good governance processes that lead to the company being a better corporate citizen.
Costs of listing and remaining listed

The planning process for an IPO including building advisory teams, due diligence, and ensuring the company is ready for
a public listing may take between 6 and 12 months, and execution of the IPO process a further 6-12 months. Once listed,
compliance with regulatory requirements is mandatory. These conditions require substantial investments, both monetary
(advisory fees, legal, banking, accountant audit, underwriting fees if applicable, listing fees, and process implementation
costs) and in terms of management time and attention. As discussed earlier, these costs come as prerequisites to enjoy the
multiple advantages of being a publicly listed company.
Share price susceptibility to external conditions

In addition to the companys performance, its share price is also affected by general economic and market conditions, factors
that may be beyond its control. However, markets are efficient instruments, and the subdued share price of a well-managed
and profitable company will generate interest from value investors, prompting an uptick in the price.
Is your company ready to go public?

Once you have assessed the advantages of a public listing and discussed your concerns with an advisor, it is crucial that you
carry out a candid appraisal of your organization to assess if your company has the infrastructure, management bandwidth
and most importantly, a culture that is necessary for life as a public company. Here are some of the questions you should
consider before embarking on the IPO process.
Is the long-term strategy I have for my company compatible with a public listing?
You need to consider the companys long-term goals and strategies and whether they are compatible with a public listing.
For example, if you have a key objective of retaining sole control of the organization, it is possible that listing on the Main Board,
where a 25% free float is required, may not be the best option for you. Alternatively, if the main reason you seek to go public
is as a mechanism of exit from the business, such an offering may not be well received by the investment community. Early
consideration of the impact of an IPO of all key stakeholders of the company is also essential to ensure a smooth IPO process.
Is management ready?
Share price
susceptibility to external
conditions
Page 34
The organizations leadership will define its future strategic direction. A listed company should be headed by a senior
management team that can convince investors of their vision and strategy to grow the company. The second layer of
management should have the capacity to conceptualize the plan to implement these growth objectives and achieve the
stipulated targets while managing an expanding organization. A strong management team will increase the companys credibility
and increase investor confidence, which in turn would likely bring in a higher valuation. Furthermore, the companys board of
directors and senior management should be prepared to deal with increased regulatory, media, and public scrutiny of its affairs.
Page 35
Do we have the operational and financial capacity to cope with life

in the public eye?
In preparation for the IPO and once listed, the company should make a
complete disclosure of its affairs to the CSE as applicable, as well as to
advisers, accountants, lawyers, and bankers. An organization should have
relatively sophisticated operational and management information systems
to enable this disclosure. Once a company is listed, meeting the regulatory
requirements would consume significant amounts of senior managements time
and also incur costs, and an organization should plan for these eventualities
before venturing on an IPO.
Do we have an investment case that can appeal to investors?

A clearly defined and articulated vision, a track record of consistent revenue
and profit growth, a solid balance sheet, a comprehensive business plan, a
financial model to quantify the plan, and a viable plan for the use of proceeds
should be presented to investors. You should be able to convince investors
that your business has the potential to stand out from its peers and that your
company presents the best opportunity for solid returns on their investment. Are
the companys products and services in the growth stage or are they maturing?
Is there potential for innovation or can the company penetrate new markets in
order to grow? Is the company versatile and able to adapt to market environment
changes? These are some of the questions that the company should be able
answer. Although your company may well have these positive attributes by now,
it takes time and planning to articulate them into a compelling investment case.
Is my company a good corporate citizen?

The company should organize its corporate affairs in a manner that demonstrates
to its multiple stakeholders that it is a responsible corporate citizen. A companys
commitment to socio-economic as well as ethical practices can play a great role in
enhancing its value in the eyes of the public. Instilling good corporate citizenship
into its core values will also bring about long-term benefits to the company.
Are there any pending financial, legal, or governance issues?

Any legal, tax, financial, or governance issues that are pending should be
resolved before proceeding with the IPO. Simplifying the corporate structure is
another factor that can help optimize the value realized for your company.
Is it the right time to list on the market?

Timing is critical for a successful IPO. Ideally, an IPO should be executed during
an uptick in the market. It should also be highlighted that the time lapse between
planning and implementing the IPO process could see markets shift in either
direction. Key determinants to analyze include factors such as the publics
appetite for IPOs, the markets overall performance and prospects, and the
countrys economic outlook.
Is your
company
ready to go
public?
Is the long-term
strategy I have for my
company compatible
with a public listing?
Is management ready?
Do we have the
operational and
financial capacity to
cope with life in the
public eye?
Do we have an
investment case
that can appeal to
investors?
Is my company a good
corporate citizen?
Are there any pending
financial, legal, or
governance issues?
Is it the right time to list
on the market?
Page 36
Its the Right Time

to go Public:
Be a Part of Sri Lankas
Growth Story
Its the Right Time to go Public Be a Part of

Sri Lankas Growth Story
he ideal time for an IPO is when the stock market is gaining momentum and there is strong investor demand. Typically,
a countrys stock market performance tracks its economic conditions. Backed by the countrys unprecedented
economic growth, the Sri Lankan capital market is well set to offer attractive returns to companies that list on the
CSE, allowing them the opportunity to channel the impetus from booming markets to share price growth.
Sri Lanka one of South Asias fastest-growing economies

Since the end of Sri Lankas three-decade civil war in 2009, the countrys economy has been on an upward trajectory,
buoyed by sound fiscal and monetary policies conducive to growth and well-executed development plans. Sri Lankas
medium-term GDP growth forecasts, as provided by the CBSL rank it as one of South Asias fastest-growing economies
and following the end of the war, the countrys economy has grown at an impressive average rate of 7.5% per annum.
The countrys fiscal and monetary policies aim to rein in inflation at mid-single digit levels and maintain the
rupees stability.
Sri Lankas fiscal deficit has steadily declined since 2009 and prudent debt management strategies have strengthened
the countrys balance sheet. The countrys sovereign credit ratings have improved since 2009, and in a direct vote
of investor confidence, foreign direct investments have also grown to LKR1bn over the same period. The government
targets a continuation of the growth trajectory over the medium term, resulting in a USD100bn economy by 2016, up
from USD59bn in 2012. Growth in the tourism, transportation, and export-oriented sectors are set to be the key drivers
of this increase.
Strong fundamentals underlie higher growth trajectory of CSE indices

The CSE has had a bull run unmatched by most other markets since 2009
Since the end of the war, the CSE has witnessed remarkable growth, with the benchmark All Share Price Index (ASPI)
peaking at 7,800 in February 2011, compared with 3,700 one year before. Given the bourses unprecedented growth levels,
Bloomberg named it one of the best-performing stock markets in the world for the years 2009 and 2010.
Further, the ASPI on average performed better (over June 2009-December 2012) than most global indices (Exhibit 13) and
some of the best-performing regional indices (Exhibit 14), such as the Bombay Stock Exchange 500 Index (S&P BSE 500)
and the Thailand Set Index (SET).
Page 41
CSEs market capitalization has doubled since 2009; further room to grow
Exhibit 13: ASPI has significantly outperformed global market indices
The CSEs market capitalization has almost doubled since 2009 and stood at LKR2,168bn (approximately USD20bn)
as of 31 December 2012 (Exhibit 16). Nevertheless, we believe there is further growth potential since the CSEs market
capitalization/GDP of 30% is still low compared to that of most other emerging markets in the region, such as Thailand
and the Philippines (Exhibit 15).
400
Exhibit 15: CSEs market capitalization/GDP ratio low compared to emerging markets (2012)
300
87%
200
77%
100
53%
0
Jun-09
Jan-10
All Share Price Index
Aug-10
Dow Jones
Mar-11
FTSE 100
Oct-11
May-12
MSCI World
43%
Dec-12
DAX
Source: Bloomberg
29%
30%
Bangladesh
Sri Lanka
17%
Exhibit 14: ASPI has also outperformed some of the best-performing regional indices
Vietnam
Indonesia
India
Thailand
Philippines
Source: Colombo Stock Exchange, Bloomberg
400
350
Exhibit 16: Authorities anticipate positive momentum to continue
300
LKR Bn
250
CSE Market Capitalization (2008-2012)
2,500
200
150
2,211
2,214
2,168
2010
2011
2012
2,000
100
1,500
50
1,092
1,000
Bombay (BSE 500)
Jakarta (JCI)
Philippines (PASHR)
Hanoi (VNINDEX)
Dhaka (DHAKA)
Colombo (ASPI/CSEALL)
Thailand (SET)
500
0
Source: Bloomberg
489
2008
2009
Source: Colombo Stock Exchange, Securities and Exchange Commission and Central Bank of Sri Lanka
Page 42
Page 43
Positive sentiment and conducive regulatory environment driving market recovery since mid-2012
Following growth in the immediate post-war period, the market eased after mid-2011 due to a market correction. However,
market fundamentals remain strong, with most companies performing well in the wake of the countrys booming economy.
The market had grown 17% by the end of 2012 after it bottomed out in May 2012; improved market sentiment and the easing
of market liquidity drove this growth.
Exhibit 18: Foreign turnover remained stable despite low overall market turnover
LKR Bn
600
Increased foreign investor confidence in the market; net foreign flow turned positive in 2012
500
In 2012, the market witnessed a positive flow of foreign investments, epitomizing foreign investor confidence in Sri Lankas
economic prospects. Net foreign inflows in 2012 reached LKR39bn, improved from net foreign outflows of LKR26bn in 2010
and LKR19bn in 2011 (Exhibit 17).
400
Foreign turnover levels remained at 2011 levels, despite low overall turnover for 2012, the latter was mainly due to the
liquidity crunch faced by local investors during the early part of the year. Foreign turnover for 2012 was LKR53bn compared
with LKR59bn in 2011 (Exhibit 18).
Exhibit 17: CSE saw net foreign buying in 2012
300
200
100
0
2009
LKR Bn
150
Foreign
2011
2012
Domestic
100
50
IPO oversubscriptions indicate strong investor appetite

Companies that have recently listed on the CSE have seen healthy investor demand, with most equity and debt listings in
2012 being oversubscribed. This trend has continued in 2013 and we believe the current environment should be conducive
to companies listing on the CSE as they can price deals at the higher end of the range and achieve optimal valuations.
0
-50
2010
2009
2010
Purchases
2011
Sales
2012
Net Foreign Flow
Page 44
Page 45
The governments 2013 budget introduced measures to stimulate capital

market growth
The government has identified the development of capital markets as a critical requirement for economic growth, and the
countrys regulatory policies are committed to providing incentives for investors in order to stimulate activity in capital markets.
The governments 2013 budget proposals introduced a number of measures aimed at stimulating market participation at
different stakeholder levels, such as:

Profits and income from investments made on or after January 1, 2013 in quoted corporate debt securities are exempt
from income tax. Accordingly, no withholding tax would apply on such interest.
The tax rate applicable on the profits and income (other than any profits and income from the sale of any capital asset),
of any company which lists its shares on or after April 1, 2013 but prior to April 1, 2014, in the CSE and issues by way
of initial public offering not less than twenty per centum of its shares to the general public, shall be reduced by fifty per
centum for the year of assessment in which such shares are listed and for another two years of assessment immediately
succeeding that year of assessment subject where such company after listing continues to maintain not less than twenty
per centum of holding of its shares by the general public.
VAT exemptions are effective from January 1, 2013 on services by unit trust management Companies to any unit trust.
Where any plant, machinery or equipment is acquired and used on or after April 1, 2013 in any stock broker company
for the upgrading of information technology infrastructure to be in compliance with the requirements of the CSE licensed
by the SEC, in relation to the risk management system, the depreciation allowance shall be one hundred per centum of
the cost of acquisition.
A reduction of the tax rate on unit trust management companies to 10% from the previous 28%.
Exemption of stamp duty for transferring shares to and from margin trading accounts.
Permitting direct investments in foreign currency in unit trusts without a Securities Investment Account (SIA).
The appointment of a Presidential Task Force to implement a Capital Market Development Master Plan to oversee the
development of the countrys capital market.
Promoting institutional investments by allowing private pension funds and provident funds to access capital market
investments in listed equity and debt up to a maximum of 20% and through Unit Trusts that invest exclusively in listed
equity and debt, up to a maximum of 20% of such Unit Trust funds.
Page 46
Debt
An Emerging Listing Option
Debt An Emerging Listing Option

Overview of the Corporate Debt Market
olatile equity markets and structural changes in credit markets, following the global financial crisis during 20072008, have brought about a global increase in debt trading. Domestically, policy changes are being implemented
to reduce constraints previously prevalent in the debt market. Moreover, the tough credit restrictions are now
slowly beginning to ease helping debt emerge as a viable source of funding. The CSE regards the softening of the
regulatory regime as an encouragement to issuers and is committed to support corporates to make use of this opportunity to
raise long-term debt capital. Long-term trends favorable to growth in corporate debt markets.
Long-term trends favorable to growth in corporate debt markets

The Sri Lankan debt capital market is dominated by sovereign issuances, while the corporate debt market is still at a nascent
stage. However, the development of the domestic debt capital market is high on the agenda of policy makers, and based on
such policy change plans, the CBSL expects the volume of corporate bonds outstanding to increase tenfold to LKR 1,000bn
by 2016. A number of encouraging long-term trends support this view:
A mature sovereign debt market has paved the way towards an appropriate legal and regulatory framework for
corporate issuances.
Tightening government yields, combined with historically low interest rates in the global markets, are fueling investor
demand for Sri Lankan corporate debt.
A reliable long-term benchmark government yield curve helps accurate valuation of corporate debt issues.
2013 budget incentives along with new debt market initiatives to set domestic corporate debt market on
a growth trajectory
Since the governments first sovereign bond issuance in 2007, policy makers and legislators have gradually implemented the
appropriate policy framework for the development of a solid corporate debt capital market.
The government announced that it would exempt withholding and income tax on interest income earned on corporate
debt securities listed on the stock exchange on or after 1 January 2013, as part of its 2013 budget proposals. Many listed
entities are using this window of opportunity to raise capital as this concession is applicable during the entire duration of
the debt. The funds raised can be utilized for future capital needs of these companies. Many companies have lined up
several debenture issues as a result.
In December 2012, the Sri Lankan debt capital market witnessed the launch of its first bond index, which measured the
performance of the countrys government securities. The benchmark, NDB Investment Bank and CRISIL Limiteds Bond
Index for government securities, will enable foreign investors to compare the performance of their investments against
other markets and, ultimately, foster the development of index-based fixed income funds.
In 2013, the CSE implemented a number of operational improvements to facilitate the trading of fixed income securities,
including migration towards an automated trading platform and adequate custody and settlement of services.
Page 51
Historically low interest rates driving global investor demand for corporate bonds
Tightening domestic sovereign debt yields underlie demand for corporate bonds
Since 2008, central banks across the globe have cut interest rates in an attempt to lower banks short-term borrowing costs
and spur economic growth. In Sri Lanka, the CBSL eased the countrys monetary policy by reducing repurchase rates to
7.5% and reverse repurchase rates to 9.5%, both by 25 basis points in December 2012, compared with 10.5% and 12.0%,
respectively, in January 2009. In a historically low-interest rate environment, in developed nations in particular, institutional
investors including pension funds and insurance companies are becoming increasingly adept at investing in emerging
market corporate debt in search of higher yields.
Sri Lanka first entered the international sovereign debt market in 2007, with a USD500m five-year bond issue priced at
8.2%. Since then, the interest rate of domestic borrowings has declined significantly, supported by improved macroeconomic
indicators and controlled inflation. Further, a positive assessment of the governments fiscal position by credit rating agencies,
such as Standard and Poors upgrade of the countrys long-term foreign currency rating to B+ from B, has contributed
to narrowing spreads. The downward shift in the yield curve is expected to continue owing to CBSLs strategy to attain
investment grade status within three years. In the backdrop of tightening sovereign bond yields, demand for Sri Lankan
corporate debt issuance is expected to increase, as investors search for robust, risk-adjusted returns.
Exhibit 19: Historically low interest rates driving investor demand for corporate issuance
Exhibit 20: Sri Lankan sovereign yields tightening
14.0%
Sri Lankan Sovereign
Yield Curve (%)
12.0%
US Sovereign Yield
Curve (%)
0.8
25.0
10.0%
0.7
20.0
8.0%
6.0%
0.6
0.5
15.0
0.4
4.0%
10.0
0.3
2.0%
0.0%
Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 Oct-12 Mar-13
ECB refinancing rate
US Federal Reserve target rate
CBSL repo rate
CBSL reverse repo rate
0.2
5.0
0.1
0.0
Jan-09
Jun-09
Nov-09
Apr-10
Sep-10
Sri Lanka Sovereign Curve 1 Year
Source: European Central Bank, US Federal Reserve and the Central Bank of Sri Lanka
Feb-11
Jul-11
Dec-11
May-12
Oct-12
0.0
Mar-13
US Treasury Actives Curve 1 Year
Source: Bloomberg
Page 52
Page 53
A reliable benchmark government yield curve provides pricing guidance
Advantages of a Debt Listing
Meanwhile, subsequent sovereign debt issues have contributed towards the creation of a long-term benchmark government yield
curve. The existence of a liquid and default-free government yield curve, regarded as a proxy for a nominal risk-free rate, is a
critical factor for the development of a corporate debt market as it is fundamental for correct pricing. The sovereigns USD1bn 10year issue in October 2010 extended the governments yield curve beyond 5 years for the first time and established a benchmark
for private sector issuers willing to finance long-term projects. Further, a transparent government yield curve has fostered strong
domestic and international investor demand, with government issues enjoying robust oversubscription; for instance, the USD1bn
10year issue in July 2012 was oversubscribed 10.5x, while the governments debut issue in 2007 was oversubscribed 2.5x.
For companies in the maturity stage, with well-established revenue streams, listing debt on the CSE can be the optimal
financing transaction to access a deep pool of capital. We examine a number of favorable factors a company may consider
before proceeding with a debt listing on the CSE.
Exhibit 21: Reliable benchmark yield curve helps accurate pricing of corporate debt
Benchmark yield curve
(%)
A company listing debt on the CSE can gain access to long-term financing as bonds often bear longer maturities between
1 to15 years compared to corporate loans, which typically bear terms between 1 to 5 years. Therefore, a debt listing on
the CSE can be the optimal financing tool for companies planning to fund projects that significantly exceed the current scope
of the business, such as strategic acquisitions, or for entities operating in industries with long pay-back periods such as
telecommunications, power and energy, and construction engineering sectors.
Achieve the optimal cost of capital
25.0
A company can gain rapid and unrestricted access to funds at competitive rates by listing debt on the CSE. A successful
listing often leads to a well-rated company paying lower rates than the interest rate paid on long-term bank loans. Further,
listing debt with the CSE helps a company to achieve its optimal costs of capital since the cost of debt is typically lower than
the cost of equity, due to lower exposure to risk for the debt investor.
20.0
Diversify sources of liquidity
15.0
A company can diversify its sources of debt financing by listing debt with the CSE
since it provides access to an alternative to the corporate loan market. A debt
listing can, therefore, be valuable for companies willing to reduce heavy reliance
on financial institutions, particularly in a credit-tightening environment.
10.0
5.0
0.0
Jan-09
Finance long-term projects
Lower financing cost in subsequent issues

Jun-09
Nov-09
Apr-10
Sep-10
Feb-11
Jul-11
Dec-11
May-12
Oct-12
Sri Lanka Sovereign Curve 1 Year
Sri Lanka Sovereign Curve 5Y
Mar-13
Prior to a public debt listing on the CSE, a company will be required to obtain
a credit rating indicating the credit worthiness of the entity. Once listed on the
CSE, a company that demonstrates the strength of its credit quality and builds a
strong reputation will often achieve higher credit ratings. Therefore, a highly rated
company often enjoys lower borrowing rates when the company returns to the
market for subsequent debt listings.
No collateral required
Source: Bloomberg
Finance long-term
projects
Achieve the optimal
cost of capital
Diversify sources of
liquidity
A well-established company may be able to access bank loans at competitive

rates. However, most banks and financial institutions will require debt to be
collateralized by the companys assets or trade receivables. In contrast, a
public debt listing on the CSE does not require a company to provide any form
of collateral, and therefore is a valuable source of financing for companies with
lighter balance sheets.
Lower financing cost

in subsequent issues
Hedge against interest rate risk
Hedge against
interest rate risk
A company listing debt on the CSE will have the choice to issue securities bearing
floating or fixed interest rates. From our experience, the majority of debt issued at
Page 54
Advantages
of a Debt
listing
No collateral
required
Page 55
the CSE bears fixed interest rates, and therefore helps the company to hedge against interest rate risk. In contrast, corporate
lending is often at floating rates as financial institutions seek to limit the risk on their loans.
Advantages for financial institutions

There are a number of compelling reasons why a debt listing on the CSE may be advantageous, particularly for
financial institutions.
Meet expected credit expansion: Financial institutions will find debt listing a means to expand their loan book. If a
financial institution expects demand for credit to increase or grow in the near future, they may prepare for this by issuing
debentures so as to ensure they have sufficient funds to meet this growth.
Debenture issues will assist an institution to expand its tier II capital base and maintain capital adequacy ratios at healthy
levels in the light of CBSLs Basel II capital adequacy directives.
Reduce interest rate risk: Debt can be issued at either a fixed or floating rate, allowing financial institutions to match the
loan repayments they receive with the payments they have to make on their borrowings. This will reduce the risks faced
by these institutions from fluctuating interest rates.
Reduce maturity risk: Financial institutions can meet long-term commitments, in terms of the loans they have given to
customers, by raising long-term debt from the market. They can also raise short-term debt in order to match loans that
are expected to expire in the short term, allowing them to eliminate maturity risk.
Page 56
The IPO
Process
The IPO Process

Eligibility for Listing
Main criteria for listing
Equity
Main Board
Diri Savi Board
Fully paid, freely transferable, and issued for cash alone

(for offer of subscription and offer for sale)
Stated capital
Minimum of LKR500m at the time of listing
Profitability
Net profit after tax for three consecutive years

immediately preceding the date of application
Assets
Positive net assets as per the consolidated

audited financial statements for the last two
financial years immediately preceding the
date of application
Minimum of LKR100m at the time of listing
Positive net assets as per the consolidated

audited financial statements for the financial year
immediately preceding the date of application
Of at least one year immediately preceding the
date of application.
Operating history
Minimum public
holding
25% of total shares
10% of total shares
Number of public
shareholders
At least 1,000 public shareholders owning not

less than 100 shares each
At least 100 public shareholders owning not less

than 100 shares each
Debt
Main Board
Second Board
Fully paid, freely transferable, and issued for cash alone

(for offer for subscription or sale) and introduction
Requirements
Please refer Section 2.2.1.c. and d. of the listing rules available on the CSE website
Please refer the CSE website for detailed listing rules

Page 61
Preparing for an IPO

The successful listing of a company on a stock exchange is the culmination of a long and time-consuming process of
careful planning and execution. The groundwork needs to be laid well ahead of the actual listing process as it involves
much more than merely ensuring compliance with a list of rules and regulations. Preparation for an IPO is the preparation of
management, employees, company structure, financial and operational procedures, and the very culture of the organization
for a sea change.
The journey to a successful listing can be considered in three phases: first is the pre-IPO preparation. Next comes the stage
of preparation for listing, which is carried out in private with the CSE, advisors, and, thirdly, the public phase of the listing
once announced.
Once management has decided to proceed with a public listing, the process of preparing the organization for life as a public
listed company begins. This phase should include reviewing the strategic business plan, building a strong management team
and board, strengthening the corporate and business infrastructure, enhancing the corporate governance team, and initiating
a good communications policy with the public and with investors. Such advance planning will enable the smooth flow of the
IPO process, and even more critically, enable successful timing of the IPO to take advantage of favorable market conditions.
Building the company management team

Professionals with the business acumen to conceive a long-term strategy
for growth, proven experience of executing such plans, and ability to
convincingly convey the growth story of the company to investors are vital
to the management team. The companys senior executive management
(such as the CEO and CFO) should drive the IPO process, and the company
should admit non-executive independent directors to the board, in order to
gain investor trust and confidence.
Engaging the external advisory team

Building a cohesive team of advisors investment bankers, bookrunners,
legal counsel, independent auditors, accountants, public relations advisors,
company registrars, etc. is a critical factor for success. An experienced
external advisory team, together with management, could greatly facilitate
the successful completion of the IPO process.
Developing a long-term strategic business plan

The company should prepare a comprehensive business plan, which outlines
the strategic direction of the organization over the mid to long term. The
business plan is effectively a roadmap setting out how the organizations growth
objectives would be achieved using the IPO proceeds and should present a
compelling story of growth and profitability. Experienced management teams
also have contingency plans in place, in the event the IPO process is derailed
due to unforeseeable circumstances.
Reorganization/restructuring of the group

Investors require that the listed entity/group owns the assets, business
licenses, intellectual property rights, contractual rights, etc. required to
Preparing for
an IPO
Building the company
management team
continue business operations. Furthermore, convoluted holding structures intertwined with family interests could cloud the
clarity of the story the listing entity is attempting to sell. Before initiating the IPO process, the company should consider
restructuring/reorganizing in order to achieve an optimal group structure and to enable disposals of units/businesses/
holdings that are not intended to be part of the listed entity.
Corporate governance requirements

The company should appoint independent and non-executive directors and also change the audit and remuneration
committee compositions in order to meet corporate governance requirements of the CSE Listing Rules. This can be a
new experience for the company as most privately held companies do not have non-executive directors. The presence of
independent and non-executive directors on the board would give comfort to the investing public. These directors would also
ensure that industry standards are adopted by the company in terms of compliance and governance.
Public relations and investor communications

The company should engage a public relations (PR) team to liaise with the media. If the company does not have a separate
public relations unit, best practice requires that the senior management should be equipped to handle the added media
scrutiny following the listing. The PR team will ensure the companys strategic objectives, growth story, management
team, etc. are communicated in a way that would enhance the organizations profile in the eyes of the general public.
The PR team could also be engaged to communicate with the media on an on-going basis and advise the company on
improving its public image.
As best practice in this process, a company should include an investor relations section on its website, which will host press
releases, filings, and annual reports, and share information as well as contact details of the investor relations department.
A user-friendly and attractive website is important to communicate with the investing public and analysts, both locally and
internationally. A sound investor relations section on the company website will help sustain market interest in the company
and attract new investors.
Engaging the external

advisory team
Developing a long-term
strategic business plan
Reorganization/
restructuring of the
group
Corporate governance
requirements
Public relations
and investor
communications
Page 62
Page 63
Parties Involved in a Listing
The IPO Process
Investment bank/issue managers
Once management and advisors are confident that the company is ready to be a listed entity, the next step in the listing
process is contacting the CSE. Early contact with the bourse would help avoid undue delays. The CSE then works together
with the management on the issue.
The investment bank will be the principal advisor to the issue and will advise the company on the timing and pricing of the
issue together with a feasible capital structure that the listing company should adopt. The investment bank will also help the
company prepare and submit the relevant application documents to the exchange. The principal advisor would also manage
the IPO marketing campaign (road shows) and optimize the distribution of shares/debt securities to institutional investors.
Before public announcement
External auditors
Finalizing preparation of documents
The audit firm will prepare the accountants report and the audited financial statements required for the listing application. The
accountants could also help the company analyse the IPOs tax implications and help the organization make the necessary
financial disclosures in its prospectus.
Once due diligence procedures have been completed, the companys legal and financial advisers and auditors, along with its
issue managers, would have helped the organization prepare for a public listing. All of the CSEs Listing Rules requirements,
such as the amendment of Articles of Association to incorporate certain specific provisions, and any restructuring and
reorganizing, should be completed by this stage. The draft prospectus should be finalized once the business plans, the
investment case, and the use of proceeds have been decided upon. At this stage, the company should also have decided on
a valuation range for the share price.
Legal counsel
The lawyers will advise the company on all legal matters falling under the purview of the listing. They could also assist the
company in compiling the documents relating to the listing, advise the company on its restructuring, conduct due diligence,
and advise the companys directors on their responsibilities. The lawyers would also review all legal documents that might
include change of control clauses, and, if necessary, draft new agreements in this regard. Legal counsel should also be
sought to settle existing litigation involving the company.
Registrar
A company would usually appoint a registrar to create and maintain a list of shareholders. The registrar will oversee the
allotment of shares and also liaise with banks, in relation to payments made for the issue, and the CDS, in relation to
lodgment of shares in respective CDS accounts.
Rating agency
If the company plans to raise debt, it will have to obtain a rating from an institute as specified in the CSE listing rules
Independent valuer
As part of the listing process, an independent valuer may be required to submit a valuation report. The independent valuer
may also be used in the event the company carries out a revaluation of its property, plants, and equipment.
Banks
Obtaining CSE approval for a Listing Application

The Initial Listing Application should be submitted to the Exchange along with certain other documents specified in the
CSEs Listing Rules (Section 2.1.4 for shares and 2.2.2 for debt securities). Once the CSE has examined the application
and ensured that the entity complies with the Listing Rules and all other regulatory requirements, approval in principal would
be granted for the listing. The time taken for the approval process would depend on the level of accuracy of the information
provided, and on average it would take two to four weeks from the date of submission of the application. Once the Listing
Application is approved, the company is required to register the Prospectus with the Registrar General of Companies.
The public phase of the listing

Prospectus Issue
The company would then issue the prospectus and the application for the shares/debt securities available to the public through
member firms and banks. Senior management would present the investment case to research analysts of brokerages, who
will then publish research reports making an appropriate recommendation.
Investor education
Banks accept applications submitted for the issue and forward them to the registrar during the allotment process.
Investment banks associated with the listing would meet with key investors and educate them about the company and its
investment case. Interested investors would then meet with the companys senior management.
Broker firm
Closing subscriptions
Broker firms also accept applications and will forward them to the registrar during the allotment process.
Subscriptions should be opened within 20 market days of obtaining approval in principal and can remain open for 14 market
days; however, they can close before that in the event of an oversubscription.
Underwriters
Underwriters could be engaged to guarantee, for a fee, that a certain share of the IPO value will be taken up in the event the
offer is not fully subscribed.
Page 64
Further steps in the run-up to trading

The registrar to the offer would complete allocation of shares to the successful applicants and credit the shares to their
depositary accounts (CDS accounts). Once this process is completed, a declaration should be sent to the CSE and trading
in the shares will commence on or before the third day after the declaration is sent.
Page 65
The Costs of Listing
The Regulatory and Legal Framework

The Securities and Exchange Commission of Sri Lanka (SEC) with the overall authority to regulate all market participants
is the apex regulator of the countrys capital market. A company listed on the CSE must operate within the legal and
regulatory framework mandated by the SEC and comply with the CSEs Listing Rules, in addition to the legal framework set
in place by the Companies Act.
Listing costs
Equity:
Debt:
Initial listing fee LKR150,000
Annual listing fee LKR50,000 or 0.003% of the market

capitalization of the listed entity as at 31 December of
the year immediately preceding, whichever is higher,
subject to a LKR1,000,000 ceiling.
Initial listing fee LKR100,000
Annual listing fee LKR50,000
The role of the SEC and the CSE
Funds:

No initial listing fee when the units of a fund are

listed
Annual listing fee LKR50,000
The CSE, on the other hand, facilitates the day-to-day operations of the stock market. Using state-of-the-art technology, the
CSE ensures fair and efficient trading and settlement in the markets.
*Above prices exclude NBT
Annual CDS clearance fees
Legal/regulatory requirements to be considered
Annual payment at the rate of LKR15 per transaction (on the Automated Trading System), subject to a minimum of
LKR10,000 and a maximum of LKR500,000 per annum.
The IPO process timeline post CSE approval (in market days)
14 days
Prospectus available (Softcopy)

20 days
Open subscription
Dispatch refunds
CSE approval
takes
approximately
2-4 weeks
CDS upload
Declaration to CSE
Listing of shares
A listed company must comply with certain specific laws and regulations in addition to the requirements of the
Companies Act:

CSE Listing Rules, CDS rules and circulars
The SEC of Sri Lanka Act of 1987 and any amendments
The Takeovers and Mergers Code of 1995 as amended in 2003
SEC Rules and Regulations
The SEC rules/laws and regulations are in place primarily for investor protection and pertain mainly to factors such as
the following:
7 days
Prospectus available (Hardcopy)
Period of subscription
The SEC, in its role as apex regulator, specifies the rules and regulations necessary to ensure fair, efficient, orderly
and transparent capital markets. It is also the regulatory body that oversees key market participants: listed companies,
licensed stock exchanges, market intermediaries and licensed stock brokers, stock dealers, and management companies
of unit trusts.
14 days
Procedures/reasons for suspension or cancellation of listed securities.
Regulation of takeovers, mergers, stake sales, share repurchases, de-listings, etc.
Prohibition and prevention of insider dealing
Further information regarding the legal and regulatory framework within which a listed company must operate can be found
in the Rules and Regulation section available online at www.sec.gov.lk / and www.cse.lk.
10 days
18 days
1 day
3 days
It is also important to note that there are certain fiduciary duties and other rules and regulations with which a company
must comply; failure to do so could result in the organizations directors being held in criminal liability. There are strict rules
requiring directors to avoid, for example:

Non-disclosure of material information.
Insider trading and price manipulation.
Page 66
Page 67
Accounting requirements to be considered

The financial documents submitted to the CSE during an IPO and thereafter need to comply with requirements specified in
the CSEs Listing Rules. In summary, these include annual audited financial statements (and interim statements as required),
dividend policy, summarized profit & loss and balance sheet for five years certified by auditors, details of financial liabilities,
and any other material information. In addition to these requirements, in case of listing debt, a company should disclose its
net debt/EBITDA and interest coverage ratio.
Ongoing disclosure requirements include the issue of financial statements as prescribed and within the time limits, disclosure
of director dealings and other corporate actions such as dividends policy. Further detail can be found at www.cse.lk.
Page 68
Life as a
Listed Entity
Life as a Listed Entity
aintaining the initial positive momentum built at the time of the IPO is critical to a companys reputation
and valuation. Therefore, an astute senior management team would ideally focus on a strategy to initiate
and maintain effective communication with key internal and external stakeholders. The specific regulatory
requirements, to be fulfilled periodically, provide an opportunity for the company to engage media and investor
attention with updates on the progress made since the IPO.
Regulatory requirements
A company should comply with five broad categories of requirements:

Corporate disclosures
Circulation of annual reports and interim financial statements
Corporate actions (dividends, etc.)
Other requirements
A majority of these requirements enable the protection of minority shareholders interests and also form part of the fiduciary
duty requirements of a companys board of directors. The companys directors are responsible for ensuring that the continuing
listing requirements are met.
Corporate disclosures
The timely disclosure of pertinent information is one of the major requirements that a public company needs to adhere to.
Such transparency enables investors to make an informed decision regarding their investments. The company, in turn, could
reap the rewards of building investor confidence.
Any information related to the company (or its shareholders) that is likely to affect the share price should be disclosed to
the CSE. The CSE may also raise queries with the company requiring clarification on unusual trading patterns or rumors
in the market.
This does not mean that the company is obliged to pre-announce all transactions to the market. Transactions during the
ordinary course of business and on-going negotiations would be exempt. Price-sensitive information that needs to be
declared once confirmed include mergers, acquisitions, significant changes in control/ownership, material changes in
revenue/profitability, further issues of securities, plans to pay dividends, and share repurchases.
In order to prevent those who are aware of such price sensitive information from benefiting at the expense of the general public,
there is a restriction on connected parties trading on the basis of information that is not publicly available. Connected parties
such as directors and employees are restricted from trading until there has been sufficient time for efficient dissemination of
the relevant information. Furthermore, directors of listed companies are required to disclose any acquisition or disposal of
shares in that company.
Page 73
Periodic reporting requirements

A listed company must publish its annual financial report within five months of the end of the relevant financial year. Companies
on the Main and Diri Savi boards need to publish quarterly interim financial statements. All financial statements should be
prepared and published in accordance with the Sri Lanka Accounting Standards.
Dividends
The decision to pay a dividend must be conveyed to the CSE immediately following the boards authorization, along with a
certification by the board that the company will remain solvent after dividend distribution.
There are certain specific corporate governance requirements a listed company must adhere to.

Non-executive directors: At least one-third of the board (a minimum of two) should be non-executive directors, in order
to help avoid the overlapping of functions between the board and the executive team.
Independent directors: At least one third of the non-executive directors or two directors, whichever higher, must be
independent. Where there are only two non-executive directors, both of them must be independent.
Remuneration committee: A credible management compensation structure that balances the requirement of adequate
payment to recruit and retain senior management, along with the necessity for investors to perceive the remuneration
as fair, is essential for a listed company. While the committee should comprise of a minimum of two independent nonexecutive directors (in instances where an Entity has only two directors on its Board) or of non-executive directors, a
majority of whom shall be independent, whichever shall be higher. The committee shall recommend to the board the
remuneration of the board of directors and the CEO. The annual report should disclose the remuneration policy and list
the directors and CEOs aggregate remuneration.
Audit committee: The audit committee should have a composition similar to that of the remuneration committee,
including all members being non-executive directors and in addition should include a member of a recognized
professional accounting body. This committee is responsible for the preparation and presentation of the companys
financial statements so that they comply with the Sri Lanka Accounting Standards and with the disclosure requirements
of the Companies Act and the CSE. The audit committee is also responsible for ensuring that the companys internal
controls and risk management processes are adequate and for recommending the appointment of external auditors to
the board.
Page 74
Disclaimer
This book is intended to provide some general information relating to the CSE. Whilst reasonable efforts have been made to include accurate
and up-to-date information in the booklet, the CSE does not make any warranties or representations regarding the accuracy, adequacy,
reliability and completeness of the information.
Therefore, the CSE and its employees disclaim all liability for any loss suffered (directly or indirectly) by any person acting in reliance upon
the information contained herein.
Colombo Stock Exchange

#04-01, West Block
World Trade Center, Echelon Square
Colombo 01, Sri Lanka
Tel: +94 11-2356456 | Fax: +94 11-2445279
E-mail: info@cse.lk |
http://www.cse.lk

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A guide to listing on the

Three IPO-backed Success Stories........................................................................................................13

Frequently Asked Questions....................................................................................................................21

Debt An Emerging Listing Option.........................................................................................................49

The IPO Process........................................................................................................................................59

Life as a Listed Entity.................................................................................................................................71

A Listing on the CSE:

A Listing on the CSE A Mark of Distinction

Rewarding excellence in large and small companies

John Keells Holdings Plc

Ceylon Tobacco Company Plc

Beverage, Food and Tobacco

Nestle Lanka Plc

Beverage, Food and Tobacco

Vallibel One Plc

Laugfs Gas Plc

Power & Energy

Footwear & Textiles

Source: Colombo Stock Exchange

Exhibit 2: Recent listings

Exhibit 4: IPOs predominated during 2010 12

Power & Energy

Sampath Bank Plc.

Banks, Finance & Insurance

Seylan Bank Plc.

Banks, Finance & Insurance

Banks, Finance & Insurance

Land & property

Peoples Leasing& Finance Company

Funds Raised (LKR. m)

Hotels & travel

Source: Colombo Stock Exchange

No. of new listings

Source: Colombo Stock Exchange

Source: Colombo Stock Exchange

Further listings an important source of funding

Corporate debt issue gaining in viability

Source: Colombo Stock Exchange

Odel A Stunning Makeover

Exhibit 8: Revenue and gross profit (LKR m):

Net Asset Value (LKR m)

Market Capitalization (LKR m)

Source: Company reports

Hemas The Transformation into a Conglomerate

LAUGFS Leveraging Stability for Growth

Hemas CEO Husein Esufally recalls the journey so far

Exhibit 9: Revenue and gross profit (LKR m):

Exhibit 11: Market capitalization and NAV (LKR m)

Exhibit 12: Revenue, operating profit (LKR m):

Source: Company reports

Frequently Asked Questions

Will my company be expected to pay regular dividends?

What would attract high-quality shareholders to my company at the IPO

Strong cash generation

High-return ratios (ROA/ROE) compared with its peers

In terms of qualitative criteria, high-quality shareholders prefer:

Will the share price fall if my company misses earnings estimates?

Brand leadership in business segments

A defined corporate strategy and business plan

Is it correct to consider that there is no cost to equity?

Are there any advantages to a public listing versus a private placement?

What is the relationship between the free float and valuation?

Going Public: Pre-considerations