The Colombo Stock Exchange (CSE) currently showcases a diverse portfolio of over 285 listed companies across 20 GICS industry groups. 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.
Access Engineering PLC (AEL.N0000) is a corporate listed on CSE with business activities in the Capital Goods Industry Group. The company has been publicly quoted since 2012.
Shanaka Fernando, Manager – Business Development at Access Engineering PLC shared the company’s experience through a Q&A as a listed company on CSE.
Raising funds via the exchange is an effective alternative to traditional funding means. What were your reasons for accessing funds for growth via the public market?
With the end of the 30 year long civil war in 2009, infrastructure development in the country started to grow at an accelerated pace. This was also the time Access Engineering was embarking on a new phase of expansion, which necessitated us to build new capacity in our core business while at the same time diversifying into new areas of business. We raised funds for these purposes via the public market through a private placement which was closely followed by an initial public offering. In total, we raised Rs. 5 Bn as new equity, offering 20% of the shareholding through the equity market, which was used to procure construction equipment, machinery, and material production plants in the core business, acquire Sathosa Motors PLC on the CSE and retire debt.
Many companies considering listing have concerns regarding one-time and ongoing costs associated with listing. Can you share your thoughts regarding the cost-effectiveness of raising funds on CSE?
While there are one-time and ongoing costs associated with listing a company on the CSE, the benefits of listing a company outweigh the costs by a large margin. Our experience post-IPO, in raising Rs. 5 Bn through a public offering of debt via the CSE in 2015 was a good example of this. We were able to raise funds via the market at an average cost lower than the interest rates that were prevalent in the banking system.
Has the transformation into a public entity reinforced or strengthened any practices at your company?
Since our initial listing on the CSE in 2012, the journey of Access Engineering has been one of growth, not only financially, but in all aspects of business. As a public quoted company, we further strengthened our governance practices and our commitment to triple bottom line. In 2013, we were adjudged the ‘Overall Gold Winner’ at the National Business Excellence Awards (NBEA) by the National Chamber of Commerce. Similarly, we have been continuously bestowed with many accolades and awards by the Ceylon Chamber of Commerce, including being selected in the category of ‘10 Best Corporate Citizens’ in the country for several consecutive years. Being a public quoted company undoubtedly has raised our corporate reputation and image. We have been able to have eminent professionals as Independent Directors serving on our Board.
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?
Becoming a public quoted company also comes with additional responsibilities, especially in terms of compliance with the listing rules. It is very important for a company to disclose all price-sensitive information and business activities to the investing public on time, so as to create a fair and equitable market for its securities. The success or failure of the share price depends on the investing public.
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?
Since the end of the civil war in 2009, the construction industry has been growing at a rapid pace. For most years, if not for all, the growth of the construction industry has continuously surpassed GDP growth and its contribution to employment generation has been tremendous. All successive governments and policy makers have perceived the construction industry to underlie economic growth, and the sector has been receiving bi-lateral and multi-lateral funding continuously. We expect this momentum to continue in the future as well, with key sectors such as expressways, rural roads, flyovers, water supply schemes, and resettlement programs leading the way. Access Engineering, being a forerunner in infrastructure development, will be a direct beneficiary of this development drive. Hence, our core business will be in very good shape.
The construction materials segment, which has seen rapid growth in the recent past, offers us very good growth potential. Today, we are one of the leading asphalt and ready mix concrete producers with a commanding market share and an island wide plant network. We expect this sector to perform exceptionally well in the short to medium term.
Our property development arm, primarily comprising of office space and real estate development, is in good shape too. Both Access Tower I & II continue to remain sought after business addresses in the city. Marina Square Colombo, Sri Lanka’s largest harbor front mix development is well on schedule with satisfactory sales. Capital Heights Rajagiriya will be completed and handed over to buyers during 21/22. We are also on the lookout to expanding our presence in the logistics sector on the strength of owning Sri Lanka’s largest single-roof warehouse. Our recently established, fully owned subsidiary, Access Logistics is expected to explore more opportunities in this sector.
While there was a setback in the automobile sector with the imposition of import restrictions, we have expanded the sale of spare parts and workshop services. Sathosa Motors also recently launched the sale of Isuzu marine engines.
The CSE has relaxed the regulatory framework to facilitate more listings. Would you like to comment on it?
The CSE currently has a less stringent criteria for companies to fulfill in pursuing a listing of their shares. A firm step taken by the CSE in this regard was the establishment of the ‘Empower Board’, which facilitates even small to medium-scale companies to obtain a listing and raise public funds.
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