manusath-derana

Sri Lankan Billionaire Liquor Baron Harry J’s Melstacorp nearing 10% stake of JKH?

February, 6, 2019

Analysts say if Melstacorp takes over control of JKH, Harry J may virtually control 4 largest Licensed Commercial Banks, several Finance and Insurance Companies apart from being a Liquor and Dairy Baron that controls Colonial era founded 2 largest Conglomerates in Sri Lanka

Sri Lanka’s one of the oldest-richest men and a Billionaire turned Liquor and Dairy Baron Harry Jayawardena, has increased his shareholding in Colombo Stock Exchange’s (CSE) leading listed Blue Chip in Sri Lanka - John Keells Holdings (JKH) to nearly 10%, latest financials note.

Billionaire Harry Jayawardena’s Melstacorp PLC owned 8.4% of JKH voting shares according to the December 31, 2018 financials of JKH. The John Keells Holdings (JKH) group is Sri Lanka’s foremost conglomerate that sells Keells Sausages to Elephant House Sausages to Elephant House Drinks; Premier Cinnamon City and Suburb Hotel Rooms to Expensive City Condominiums in the country apart from controlling a larger share of Port Operations, Tea and Rubber Broking to several other industries. The JKH group’s over 13%-16% stake for almost two decades has been under ownership of Billionaire Sohli Captain and family along with his company Paints and General Industries that also control one of Sri Lanka’s oldest and leading agricultural and fertilizer business conglomerate CIC Holdings. Sohli Captain and Rusi Captain along with Paints and General Industries still control over 20% of JKH as at 31st December financials.

The second largest shareholder of JKH is Malaysia’s state investment arm Khazanah Nasional’s special investment purpose vehicle Broga Hill Investment Ltd (Current stake 10.2%) that bought an 8.9% stake in Sri Lankan conglomerate John Keells Holdings (JKH) for nearly US $ 120 million in Mid-March 2012 and increased the stake form their onwards till 2013.

JKH recently concluded a buyback of shares by January 2019, which was announced in November 2018 that planned to execute a share buyback to the tune of Rs.11.1 billion, offering to repurchase one out of every 20 ordinary voting shares in issue, at a price of Rs.160 per share from existing shareholders. The Board of Directors of John Keells Holdings PLC (the Company) highlights in the December 2018 financials that they resolved on 11 November 2018 to repurchase up to a maximum of 69,376,433 of its Ordinary Shares, amounting to 5% of the total number of issued shares of the Company and the Company received acceptance of 32,189,118 Ordinary Shares (which amounts to acceptance of 46%) and 37,187,315 shares were allocated for repurchase based on the additional applications. A total amounting to Rs. 11.10 billion has thus been paid out on 25 January 2019.

As at 31st December 2018 JKH had 1,387,528,658 (over 1.38 billion) voting shares in issue whilst  10,914,400 (Over 10 million) of them are owned by current Chairman Krishan Balendra and 20,006,476 (Over 20 million) of them are owned by his father and first Sri Lankan Chairman of JKH Kandiah Balendran. Apart from that recently retired JKH Chairman Susantha Ratnayake also owns 9,241,144 (Over 9 million) shares of JKH making the two former Chairmen and Present Chairman Billionaires in the country. Market analysts note that a possible subsequent purchases by Harry Jayawardena after the December quarter, it is likely that the Melstacorp holding in JKH may be close to 10%.

Market analysts further points out that if Billionaire Harry Jayawardena or his Melstacorp representatives get a Board Seat or two of John Keells Holdings (JKH) will indirectly give opportunity to Harry Jayawardena and his family to control JKH associate and subsidiary banks and insurance companies such as Nations Trust Bank and Union Assurance. Harry Jayawardena already controls country’s largest privately owned three licensed commercial banks in Sri Lanka including HNB, DFCC and Commercial Bank apart from the finance and insurance companies owned by those banks apart from Harry Jayawardena owned Continental Insurance. Some economic experts and analysts outline that many entrepreneurs and common people lose access for credit opportunities or unable to seek potential credit for enterprise growth once a ‘Mega Oligarch’ take the control of several banks in the country which will provide ample of huge opportunities for such an Oligarch to take over other ailing businesses or running enterprises in an economy which has only 21 million populace, whilst such an economy is controlled by mostly un-educated politicians that take unwise policy decisions falling to the hands of the Oligarchs business agenda. Earlier Sri Lanka’s financial regulators had written legislation that has prevented local banks from falling into the hands of a controlling shareholders such Harry Jayawardena, however he still continue hold a larger percentage of HNB, DFCC and Commercial Bank whilst it has also paved some Harry J favoured professionals (who are also relatively attached to country’s top politicians) to serve the top seat in top two privately owned banks in the country including HNB and Commercial making history in Sri Lanka.

JKH reported revenue at Rs.36.55 billion for the third quarter of the financial year 2018/19 which is a 17% increase over the Rs.31.22 billion recorded in the previous financial year. The cumulative revenue for the first nine months of the financial year 2018/19 at Rs.99.28 billion is an increase of 13% over the revenue of Rs.87.66 billion recorded in the same period of the previous financial year. The profit attributable to equity holders in the third quarter of the financial year 2018/19 at Rs.4.80 billion is an increase of 7% over the corresponding period of the previous financial year, whilst the first nine months performance at Rs.12.08 billion is an increase of 9% over the previous year.

 

- Reporting by Devendra Francis