Senaka Kakiriwaragodage, the Chief Executive of NDB Capital Holdings—a subsidiary of NDB Bank specializing in capital market operations—discusses the economic recovery measures and how his company is strategically positioning itself for both local and global expansion, tapping into new capital market opportunities for its diverse clientele. He begins by explaining his reading of the recent economic developments, challenges and outlook for the economy, and emerging investment opportunities:
A year ago, we grappled with rampant inflation, free falling exchange rate, and emigration due to economic uncertainty. While challenges persist, our nation’s recovery has been noteworthy. Interactions with international stakeholders affirm our resilience. We’ve managed to bring inflation under control and moderate interest rates. The business community deserves recognition for navigating these trying times.
Despite progress, challenges remain, especially in the government sector. We must address budget deficits, optimize spending, and reduce public sector financial strains. Previous IMF programmes were often incomplete, but we must commit to sustainable reforms this time. We forecast a 3-4% GDP growth for the upcoming year, but our long-term aim should be 7-8% to offset the recent economic setbacks, and there is every indication that we could if we stick to the reforms.
Can you share insights into your outlook for capital markets and the factors influencing their trajectory?
Sri Lanka’s capital markets, primarily fuelled by equity and fixed income, lack depth. With a market capital-to-GDP ratio under 20% and a prevailing reliance on bank deposits for fixed income, there’s significant potential to diversify and deepen the capital markets. Recent economic headwinds, exacerbated by interest rates peaking at 25% to 30%, hindered corporate investments. However, with declining interest rates, the cost of capital is becoming more favourable, paving the way for renewed business and investor confidence. Our involvement in capital raising, IPOs, and M&A witnessed a recent lull, but with more accessible capital, we foresee a resurgence. Given Sri Lanka’s high leverage across government, corporate, and personal sectors, there’s a pressing need to boost equity investments. While domestic capital market investments play a crucial role, drawing foreign capital is vital for sustained growth. NDB Capital Holdings remains at the forefront of facilitating this transformation.
How is NDB Capital Holdings poised to unlock opportunities for its clients?
In examining our group’s operations, we span both B2B and B2C sectors. Our investment banking segment is primarily corporate-focused. Even during challenging times, we’ve successfully executed IPOs, facilitated capital raises, and conducted debt transactions. Notably, we’ve channelled substantial foreign capital from development financial institutions into Sri Lanka during periods of currency constraints.
Beyond merely raising funds for domestic operations, our vision encompasses a global reach for our clients. We’ve assisted Sri Lankan companies in securing funds for their international expansion, with a recent fundraising in Africa for a prominent apparel firm. Presently, we’re working on financing deals in the Maldives and Africa, supporting local companies in their overseas growth. Recognizing the importance of diversified operations and enhanced dollar inflows, our endeavours also aim to address the country’s balance of payment deficit. Our focus is twofold: executing transactions beyond Sri Lanka’s borders and guiding Sri Lankan enterprises in establishing and financing their overseas pursuits, positioning them as regional or global contenders.
In the realm of private equity and direct investments, we perceive an over-leveraged landscape in Sri Lanka. Many businesses are in dire need of equity injections. Our goal is to identify these enterprises, ensuring they have the necessary capital to elevate to the next phase, be it through private equity or venture capital. We’re especially keen on high-growth sectors, such as tech-enabled businesses, and are actively pursuing opportunities in these areas.
Transitioning to our retail segment, primarily composed of stock broking and wealth management, we’ve witnessed remarkable growth in recent years. Currently, we manage assets worth 230 billion, spanning both retail and corporate domains. Our mission is to diversify investment options for our clientele. While traditionally, investment avenues in Sri Lanka have been largely confined to bank deposits and some stock market offerings, we’ve significantly advanced the unit trust industry here. Our future roadmap involves delving into alternative investments, from mutual funds and balanced funds to private equity, venture capital, and real estate ventures. Collaborative partnerships are underway to offer these innovative solutions to our investors. We’re also leveraging technology to ensure a streamlined, up-to-date investment experience.
Ultimately, our ambition is dual-pronged: bolstering corporate growth and amplifying wealth for our retail investors. This mission drives our every endeavour.
When you contemplate the future, what is your vision for NDB Capital Holdings?
While most of our operations are rooted in Sri Lanka, a portion of our revenue stems from international sources. Within the next 3 to 5 years, we’re aiming for at least half of our revenue to be generated internationally, aligning with Sri Lanka’s objective of amplifying exports and ensuring a positive trade balance.
To realize this vision, collaboration is key. We’re actively seeking partnerships with global investors and institutions. Our goal is to enable our clients to establish and flourish in international markets, and we’re poised to offer guidance and support.
Domestically, our capital market business holds potential for growth and diversification. As industry leaders, we’re pushing for enhanced investor education and the introduction of diverse financial products. With the CSE initiating practices like short selling, we’re keen on pioneering more innovative investment avenues.
Our vision is comprehensive. Beyond asset management, we aim for an all-encompassing wealth management strategy, considering crucial elements like succession planning and trust services. We’re inspired by global frontrunners like BlackRock and Blackstone, and while we may not match their scale our goal is to offer services of comparable scope and excellence, ensuring exciting value-added benefits for our clients and investors.