INVESTMENT FIRM CHAIRMAN SAYS PROFITS FROM SRI LANKA INVESTMENTS COULD BE THREE FOLD EARNING 35 PERCENT
Posted on September 19th, 2009

By Walter Jayawardhana

Roman Scot, Managing Director of Colamender, a Singapore based investment firm recently told a Singaporean TV channel that the profits through investments in Sri Lanka in certain areas he proposes would be three fold, earning about thirty five percent returns.

Responding to a query as to why anybody should be investing in Sri Lanka Scot said, even during the civil war that ended in last May ,the island nation’s GDP stood at 6.6 and their fervent hope is that it would reach 9 percent due to the peaceful atmosphere that had returned to the country. Due to this the investors could increase their returns to three fold.

He was asked how could this be when clear assurance has not been received from certain countries. But Scot said, any person visiting Sri Lanka will be able to understand the reality of the situation. Everybody will be able to work according to their conscience.

Speaking about companies in which the people should invest in he said there are companies in the island who face a dearth of capital. He emphasized if they invest in those companies the profits would be two to three fold. No one in Sri Lanka wants another war. Even the Tamils want to have a better life, owning property , having a vehicle and a house.

Calamander Chairman Roman Scott is hoping to raise $ 150 million in the South Asian nation.

Fowwing are some of the questions asked from Scot and his responses:

How do you get comfortable with political risk in the country after a three-decade war?

Outsiders, especially Westerners, don’t understand that over the last six years, Sri Lanka has grown faster than all ASEAN (Association of Southeast Asian Nations) countries except Vietnam. Now imagine what you can achieve without the war. The war thing has always been a perception issue. Unlike the situations in Iraq, Afghanistan or Israel, what happened in Sri Lanka over the last two years is that the Tamil Tiger rebels have been largely removed. The political risk is not the resurgence of the Tigers movement, because there are no Tigers to resurge. The risk instead is fighting the economic war, and putting in place the right economic policy.

What kind of investors are you marketing the fund to?

We’d like to have an investor base as mixed as possible and hope to have no more than one-third of investors coming from the U.S. and Europe. But for the majority, our focus is on Asia, particularly Indian institutions and high-net worth individuals, and to a lesser extent, ASEAN and the rest of Asia. That’s because they understand the Sri Lanka story. It’s the Cinderella story of Asia. Like all Cinderellas, Sri Lanka is the prettiest girl although she works in the kitchen infested with rats “”…” and Indians understand that. It’s closely tied to the Indian economy, almost like another province of India.

Why does the fund plan to invest in commodities?

The demand for soft commodities in Sri Lanka is dependent on Asian demand. For example, demand for rubber is tied to Asian growth and future global growth, and is less tied to Wal-Mart. Demand for tea, for example, is more fundamental. If you have a cup of tea in the morning, the demand is resistant to recession and consumption doesn’t change much. Demand for building and construction products remains strong in Asia, especially as much of the Asian governments’ economic stimulus packages goes into construction projects.

How do you plan to create value?

Virtually every company in Sri Lanka is not adequately capitalized and is not efficient. For instance, some tea factories in the country are using machinery that’s 90 to 100 years old, and some are still powered by steam engines. The country has the biggest concentration of low-hanging fruit on the planet. It has been in a war for 25 years, which means no investment for 25 years. We are taking something out of the 19th century and into the 20th century. Accordingly, we will use very limited leverage, no more than one-third of the transaction value. And the leverage will be primarily for working capital needs.

What is your exit strategy?

Exits will rely on trade sales to larger companies from the Asian region that are looking for a foothold in the country or a supply of goods. For example, the Indonesians and the Chinese are interested in rubber assets, and the Singaporeans and the Malaysians are interested in building materials.

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