Sri Lanka’s NDB strikes historic deal with Norwegian Development Finance Institution
Sri Lanka’s NDB last week signed an agreement with Norway’s development finance entity Norfund which will see the latter taking up a 9.9% stake and boosting the Lankan bank’s growth and expertise to empower the private sector, according to local media reports.
Heralding many firsts and major significance, Norfund under the deal will be making its maiden equity investment in Sri Lanka whilst it will be also the first investment in Asia in 2021. It is also NDB’s first foreign equity placement agreement, the Daily FT reported.
The news report has further stated that Norfund will participate in the NDB’s upcoming Rights Issue for Rs. 8 billion (announced in October 2020 at Rs. 75 per share) by way of subscribing to unsubscribed rights and also by way of a private placement if required at Rs. 82.50 per share which reflects a 10% premium on Rights Price. In the event Rights Issue is fully subscribed by existing shareholders, realisation of Norfund commitment would see NDB’s capital being boosted by Rs. 11 billion. This will increase its foreign shareholding percentage to around 21%.
The Norfund investment is subject to other conditions, including regulator and shareholders approvals.
A symbolic agreement to this effect was exchanged between Norwegian Ambassador Trine Jøranli Eskedal and NDB Chairman and young business leader Eshana de Silva.
According to Daily FT, NDB has described the Norfund investment as a game changer, as the latter will extend technical expertise where necessary in areas of private sector development especially SME sector, financial inclusion and digital technologies. NDB will also have access to a vast pool of long term funding from Norfund which has US$ 2.8 b investments in 163 projects in a number of countries and has defined 29 core strategy countries in Asia, Africa, and Latin America.
“This investment comes at a time when most of the world is facing external macro-economic challenges especially due to the global COVID-19 pandemic with rating downgrades etc. In that context it is extremely heartening to see we have Norway and its Norfund who believe in the resilience of NDB and Sri Lanka,” De Silva has said.
NDB is one of the fastest growing and the fourth largest listed commercial bank with assets growing by 18.4% in 2020 to Rs. 632.1 billion.
Norwegian Ambassador Eskedal has been quoted as saying, “I believe that this is a good indication of the faith and trust Norfund has placed on the Sri Lankan private sector, and I hope it conveys a positive message to other potential investors in Sri Lanka, in particular in this challenging time.”
Sri Lanka was added to Norfund’s list of mandated countries in 2019 and before NDB it had invested in debt of Softlogic Life.
NDB Chairman de Silva has described the Norfund investment as a momentous occasion for the bank given the challenging times amidst global COVID-19 pandemic.
However he has further said that NDB in 2020 continued its growth momentum showcasing a robust 21% growth in deposits, 8% growth in loans and advances and an 8% growth in after tax profit.
“As we evolve we understand we need a long-term partner with shared goals and bring in added expertise and support. I am indeed delighted that Norfund is that ideal partner for NDB.
“Our aspirations to create an economic revival by encouraging financial inclusion and sustainable exports driven SMEs will get a big boost with Norfund investment and technical assistance. I believe driving sustainable development is one of the Norfund’s objectives and help boost Sri Lanka’s competitiveness,” NDB Chairman has emphasised.
The deal between Sri Lanka’s NDB and Norfund is indicative of the growing business potential in Sri Lanka as well as the level of confidence international funding agencies have on the island. Sri Lanka’s geographical positioning in the Indian Ocean and the many trade agreements as well as trade concessions enjoyed by the country have made it a business hub in the South Asian region. All this economic activity has expanded Sri Lanka’s attraction as a business destination offering many business/investment opportunities.
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