Lanka needs Japanese style determination for economic revival – Chairman Chrissworld
This powerful source of capital raising is attracting more attention among Sri Lankan corporates of all scales, as an opportunity to benefit from financial flexibility, improved access to capital, increased global profile and access to liquidity. The ability to tap into global capital without the restrictions inherent in traditional lending terms is a powerful tool and attractive proposition.
The shares of Chrissworld PLC (CWL.N0000) commenced trading on the Colombo Stock Exchange (CSE) in 2021 on the Empower Board of the CSE under the ‘Service’ sector.
Sri Lanka as a nation has hit rock bottom, but if all get together the country can be turned around. For this Sri Lanka needs a Japanese style determination.
“If that happens, the true potential of Sri Lanka’s strategic geographical location and its potential for logistics, will open up, creating great opportunities for us,” said Chairman of Chrissworld PLC, Christopher A.M. Perera.
“Think of how Japan rose from the depths of horrific atomic bombings. They got together as a nation, committed and determined to reach where they are now. That’s the hope for us. Being always positive minded in whatever I do, I believe this hope will convert to good results for us,” he said.
The ‘Daily News Business’ shares Chairman of Chrissworld PLC, Christopher A.M. Perera’s experience of listing on the CSE.
Q: Raising funds via the exchange is a cost-effective alternative to traditional funding means. What were your reasons for accessing funds for growth via the public market?
A: The main reason is the saving on interest costs. We had a demand from the industry to offer more space to our clients and going in for new rented warehouses required a considerable amount of liquid cash. In our case, interest payments in the Company were high and going for further bank loans, was going to make the situation worse. Accessing public funds for a company with great potential for growth is a win-win for both the company and the investors.
Q: Can you share your thoughts on why raising funds via the exchange can accord a company greater flexibility and be cost-effective over the long-run as compared to traditional forms of funding?
A: Collateral for funds is a big challenge for SME’s. If we go to a financial institution, nothing works without collateral. Secondly whatever that is borrowed has to be paid back with interest within a specific period of time and the repayment does hurt your cash flows. The repayment can fluctuate based on market interest rates, thus it is hard to budget your finance cost. Many companies struggle because their operating profit is wiped out by interest. Sourcing funds through the Exchange, is based on investor confidence and if in the eyes of investors, we are capable of delivery, we have posted good results prior to sourcing and if the investor sees a good return for his investment through future potential, the collateral is your skills and ability to deliver and not what assets you possess.
Q: At what point of the growth curve do you think a company in a similar market as yours should consider listing?
A: I would say three consecutive years with an operating profit is probably a good point to start subject to clear evidence of financial discipline in the management and a promising future for the business.
Q: In the local context, there is a hesitancy to access funds via the exchange. What do you think those reasons are and how would you address them for those on the fence?
A: My assessment is that many private companies in Sri Lanka look at individual growth more than the Company’s growth. This creates manipulation of figures and circumventing statutory requirements and leads to a natural fear to list. Some, and admittedly us included, have concerns about possible takeover of the company by the investors. Some are happy with the status quo and do not wish to change under any circumstances, irrespective of the benefits. There are others who feel that the process of listing and the post listing period is bureaucratic and tough to tackle.
Therefore, my advice to any company on the fence is to first be clear of any financial indiscipline. That is the biggest advice I can offer. All other challenges are manageable and within your control. Anything within your control, which for some reason goes out of your control, could be construed generally as your fault.
Q: How should companies view organisational structure pre-IPO in order to ensure success post-IPO?
A: It isalways best to have a good organizational structure, but practically it may not be the case with some companies due to various factors. That should not deter you from considering a listing. I would not pay too much attention to pre -IPO organization structure. If you have the right people in your organisation, structuring it to handle post IPO requirements successfully should be a piece of cake.
Q: Has the transformation into a public entity reinforced or strengthened any practices at your company?
A: Of course, it has. We have moved from a casual approach to a more formal status. There are deadlines to meet now, which we may have procrastinated before. We have raised the bar in our management style and discipline. I think it’s important to do so. After all, when you become a PLC, you need to kick the casual approach away and act as a PLC.
Q: Can you share your thoughts on the importance of effective communication regarding your future plans with your shareholders post-listing and how that reinforces the success of the share price?
A: It is extremely important to communicate effectively to your shareholders of future plans. This should not be considered as an attempt to raise your share price. End of the day, plans are what you have in your mind and what you seriously consider to put into action. Some may work and some may fall on the wayside. Some may think that this could lead to information leaking to our competitors. Personally I am never afraid of competition. In fact, I think competition is important to make us do better. In the end the better party wins a bigger share. My principal is to synergize with competition, which we are in fact doing even now, with good results.
Q: CSE provides access to raise funds globally. Do you have any thoughts or experience on how foreign investors add value to your company?
A: Through foreign investment, we have a good opportunity to go beyond the shores of Sri Lanka to start up in potential countries. Local investors may not have that strength or capability. We are looking at opening up in other Asian countries and it’s certainly an interesting option, if there is a possibility for the CSE to provide access to foreign funds.
Q: The CSE has relaxed the regulatory framework to facilitate more listings. Would you like to comment on it?
A: Our country is in a growth mode. We have extremely talented, professional and skilled people in our country. There is tremendous potential in local entities to elevate their businesses to a higher level. It’s a welcoming move by the CSE to relax the regulatory framework. I truly appreciate the formation of the Empower Board. You have duly recognized the importance of the SME sector and the need to support their growth.
Q: How vital is it for an organization to manage its debt-to-equity ratio?
A: It is very important to manage this ratio well. We tend to ignore this when running private entities and very often companies get into trouble by exceeding acceptable gearing measures.
Q: How has your company adjusted to the current global environment?
A: Globally, there is a recession in place. There are many crisis situations. Sri Lanka is impacted further due to corruption and mismanagement of our economy. As a Company, our strategy has been to expand our scope of services, whereby we don’t depend on any particular or limited products. We have done well despite the current downturn in the economy, but we cannot afford to rest on our laurels. Our main focus is to expand our scope and explore new opportunities, wherever possible.
Q: How do you foresee the growth of your company going forward? Are there any specific opportunities or initiatives you are exploring and would like to share with the investing public?
A: One objective of serious interest for me is to venture overseas with the Chrissworld Brand. We have already initiated work in this regard and it looks very promising. Hopefully we can share good news with our investors once the loose ends are tied up.
(This interview series is compiled by the Colombo Stock Exchange)