Kanrich boss says they’re not a failed finance company and will become stronger after merger

Merging with Nation Lanka in terms of Central Bank Master Plan

Kanrich Finance Ltd (KFL) is not a failed or collapsed company and is doing well in terms of all financial indicators. Therefore, by respecting the Master Plan of the Central Bank, Kanrich will amalgamate with another finance company and continue/engage in finance business as a stronger merged entity, Chairman and Director KFL, Ravi Ratnayake says.

“We will be merging with Nation Lanka Finance PLC (NFL) and will increase their capital funds to over three billion rupees. This is being done under the Master Plan for Consolidation of Non-Bank Financial Institutions by the Central Bank. We have received the approval for this merger which is aimed at meeting the deficit of the capital adequacy requirements of Rs. 2.5 billion, ” Ratnayake told the Sunday Island.

The Central Bank plans to reduce the number of finance companies in business here from 42 to 25. “One condition of their Plan is that the companies which cannot show a capital of Rs. 2.5 billion must merge with another company or become a non-licensed company. Though Kanrich fulfilled all other requirements, we missed this threshold marginally. We had to fill this capital gap or become a non-licensed company. Therefore, Kanrich is in the process of finalizing a merger with Nation Lanka,” he said.

“As directed by CBSL, Kanrich Finance has already started to settle its public liabilities of customers in full and this process will be completed before the end of February 2023. We are settling these liabilities as part of the conditions for the merger. We have adequate funds to settle all deposits and promissory notes.” Ratnayake added.

He said that Kanrich depositors after they received their deposits are welcome to join the newly merged entity. “There is another advantage to them as they can benefit from the increasing deposit rates in the market. In addition, our staff can provide advice if needed on re-investing.”

Ratnayake said that with the merger, the total branch network would increase to 60 and staff to nearly 1,000 but assured that there would be no re-trenching.He stressed that Kanrich Finance is doing well and continues to make profits demonstrating high financial stability. “Despite the C-19 and regulatory restrictions, we posted Rs. 183 million in profits before tax and Rs. 113 million after-tax profits last year. Kanrich is also reaching Rs. 2 billion capital and possesses an impressive capital adequacy ratio of 29 percent.” he added.

He recalled that prior to this in 2019 Kanrich had a hard time overcoming many challenges. They did so by institutional restructuring, cost reduction, and increased efficiency and productivity resulting in a positive turn around reducing overhead costs. Senior management even voluntarily agreed to cut their salaries and allowances.Commenting on their successful micro finance business, he said their product was entirely different from what is available elsewhere in the market as it was based on a sustainable financing concept.

“However we opted out of such loans mainly due to political interventions in the microfinance industry.”

The political leadership publicly declared in 2019 that they would write off rural masses’ micro-loans, resulting in the accumulation of extensive NPL portfolios by financial institutions, including Kanrich. The extensive NPL portfolio in the micro product resulted in weak income statements and tight liquidity.

The company was subject to severe lending and deposit restrictions by the regulatory authority.He stressed that Kanrich will not exit from the finance business as it is not a failed or collapsed company and does not have any other financial problems.

“On the contrary, we are doing well in terms of all financial indicators. After the merger we will continue to engage in the finance business as an even stronger merged entity,” he added. “With the amalgamation with Nation Lanka we will become stronger and as a standalone lending institution will provide a better service to customers. With the merger we will rebrand and introduce a new product line up.”