Fifty per cent tax incentive prompting more and more companies to go for IPOs

By Hiran H.Senewiratne

The government’s 50 percent tax incentive for new companies to be listed in the CSE will come to an end on December 31 this year. Therefore, several companies are using that opportunity to enter the capital market by way of Initial Public Offerings (IPO), CSE- Head of Marketing Niroshan Wijesundera said.

Wijesundera said that to promote the listing of local companies with the CSE, Prime Minister and Finance Minister Mahinda Rajapaksa had proposed a 50 per cent tax concession for the years 2021/2022 to be availed of before December 31, 2021, and to maintain a corporate tax rate of 14 per cent for the subsequent three years of these opting entities.

Amid those developments, trading activities at the CSE were positive at the beginning yesterday but later the market turned negative. But considerable buying interest was witnessed in plantations, manufacturing and consumer related sectors in the market, stock market analysts said.

Due to price increase in retail and consumer items in the market, the consumer sector witnessed profitability. Further, manufacturing sector entities, such as tile sector counters, also witnessed price appreciation in the stock market. Plantation sector was exceptional yesterday and its prices appreciated in a notable manner.

During the day both indices moved downwards. All Share Price Index went down by 18.54 points and S and P SL20 declined by 0.23 points. Turnover stood at Rs 7.5 billion with two crossings. Those crossings were reported in Renuka Holdings. which crossed two million shares to the tune of Rs 36.2 million and its shares traded at Rs 17.60 and Kelani Valley Plantations 350,000 shares crossed for Rs 20.3 million and its shares traded at Rs 58.

In the retail market top seven companies that mainly contributed to the turnover were, Browns Investments Rs 1.3 billion (106 million shares traded), LOLC Holdings Rs 693 million (746,000 shares traded), Sunshine Holdings Rs 584 million (15.2 million shares traded), Expolanka Holdings Rs 562 million (2.4 million shares traded), Agalawatte Plantations Rs 414 million (8.6 million shares traded), Browns Investments Rs 397 million (1.6 million shares traded) and LOLC Finance Rs 359 million (14.4 million shares traded).

During the day plantation sector companies made considerable gains. Agalawatte Plantations share price appreciated by 24 percent or Rs 9.50. Its shares started trading at Rs 40.20 and at the end of the day they shot up to Rs 49.70, Watawala Plantations share price appreciated by 11 percent or Rs 11.75. Its shares shot up to Rs 121.25 from Rs 109.50 and Kelani Valley Plantations share prices appreciated by 11 percent or Rs 5. Its shares increased to Rs 59.70 from Rs 54.10.

It is said that high net worth and institutional investor participation was noted in Brown & Company and LOLC Holdings. Mixed interest was observed in Bogala Graphite Lanka, Expolanka Holdings and ACL Cables, while retail interest was noted in Browns Investments, Lanka Orix Finance and Sierra Cables. During the day 516 million share volumes changed hands in 54000 share transactions.

Meanwhile, Capital Alliance Limited (CALT) will list its equity shares on the Colombo Stock Exchange (CSE) via an Initial Public Offering tomorrow. The CALT IPO has gained significant traction and is highly anticipated by investors.

CALT offers 41,177,236 ordinary shares for a 12.5 per cent stake to the public, priced at Rs 10 per share. The IPO price per share provides a discount of 18.64 per cent to an incoming investor compared to the Rs.12.29 price per share derived by the Independent Valuer, Ernst and Young Transaction Advisory Services.

Yesterday, the US dollar rate was quoted at Rs 200.77, which was the Central Bank controlled rate. The actual market rate is more than the Rs 140 level.