Rajiv Gunawardena engineered a spectacular turnaround of a failing finance company. He is now leading it into the future with the same sense of urgency and desire to take up challenges and succeed.
He was 25 years old when he returned to Sri Lanka with a bachelor’s degree in business and information systems from the UK and a master’s degree in accounting from Australia. He joined Asia Capital as a Senior Investment Analyst but took up a challenge to join the restructuring at Asia Asset Finance. The finance company was family- owned with Rs335 million core capital shortfall and accumulated losses of Rs434 million. Around this time, in 2008, several finance companies belonging to the Ceylinco Group faced severe distress, which shook the entire financial sector, requiring the Central Bank to intervene.
“Back then, we gave our staff hope. That gave them the belief and confidence to take the company out of a crisis. They will now take us to the future.”
Public trust in non-bank finance companies was shaken, and it was a difficult time to be restructuring one. The following year, Gunawardena was appointed an executive director and within a year, the asset-liability mismatch was bridged and most loans that were in default were recovered. With the shareholder confidence improving, the company went public with a Rs425 million IPO in 2011, which was oversubscribed despite the stock market declining 8.5% that year. The company’s position was solidified when India’s Muthoot Finance—the world’s largest gold financing company—acquired the controlling interest in Asia Asset Finance in 2015.
By March 2019, the company’s net book value had grown to Rs1.9 Billion with a total asset base of Rs13.8 Billion. Sri Lanka’s finance companies have new challenges to deal with today. An economic slowdown, overcrowded market and higher loan provisioning rules introduced by the IFRS 9 accounting standard have impacted finance company earnings.
Generating high returns in this environment is challenging. It’s in this climate that Asia Asset Finance is rolling out a digitalisation strategy to ensure that the company can reduce costs and enhance efficiency and profitability. Asia Asset Finance is investing in a core IT system, developing an app and automating transactions. It hopes to reduce operating expenses by 30% and double profitability gradually, Gunawardena says.
Despite the challenge in achieving this goal, Gunawardena believes “we have the backing of our staff and our board, the same people who made the turnaround possible all those years ago,” he says. “Back then, we gave our staff hope. That gave them the belief and confidence to take the company out of a crisis. They will now take us to the future.”