The shares of LOLC General Insurance (CODE: LGIL-N-0000) commenced trading on the Colombo Stock Exchange (CSE) recently. The shares have been listed on the Diri Savi Board of the CSE under the “Property & Casualty Insurance” sector.
The listing was followed by a remarkable Initial Public Offering (IPO) by the company, and the issue was oversubscribed on the opening day itself.
Today in our Daily News Business ‘INSIGHTS BY LISTED CORPORATES’ CEO LOLC General Insurance Limited Kithsiri Gunawardena shared the company’s experience of listing on the CSE.
Q: 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?
A: Our parent company LOLC Holdings PLC is a leading brand in the financial sector for decades. LOLC General Insurance PLC has been in the business of insurance for just over a decade now. Our customers place total trust in us while they transfer their risks to us.
Insurance business is built on the foundation of trust. Being listed in the stock exchange has brought greater transparency to all our stakeholders and further strengthen our commitment towards them.
This we believe would enable us to accelerate our growth momentum further. This is the primary reason for the company to adopt listing in the stock market.
Q: At what point of the growth curve do you think a company in a similar market as yours should consider listing?
A: Insurance is a long term business. Companies need to mature to achieve the critical premium levels and return profits consistently. Most companies would want to show good growth during initial years and try to achieve the critical premium levels as early as possible. Hence it is beneficial for companies to enter the equity market early so that they could make use of the much needed capital assistance during its growth phase. Investors too would reap the maximum benefits in the long term.
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: Probably perception and lack of awareness are the key factors. We believe CSE is now conducting various programs and providing regulatory relief for companies to list themselves. We see many companies being listed in the CSE lately and the initiatives of CSE bearing fruit.
Q: How should companies view organizational structure pre-IPO in order to ensure success post-IPO?
A: Service organisations such as ours are people centric. Our strength is in our team. It is vital that organisations maintain a solid structure to ensure that the commitments towards the shareholders are continuously met.
Q: Has the transformation into a public entity reinforced or strengthened any practices at your company?
A: Yes, IPO has been a good reminder for us to focus on our basics and fundamentals even more in order to maintain investors’ confidence.
It has further strengthened the Company’s reporting practices such as publishing quarterly/annual financials on the CSE site and improved governance practices with regard to conducting board and committee meetings to comply with the listing rules.
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: Publishing quarterly financials/audited financials on the CSE site provides opportunities for shareholders to review the past performance of the Company and assess the future potential by analysing trends. The published results, depending how favourable they are, would have an impact on the share price.
Communicating positive results and new initiatives of the Company via advertising campaigns on social media platforms and all available advertising platforms could also reinforce the perception that the shareholders bear of the company and that could positively impact the share price which could increase shareholder wealth.
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: Foreign investment can stimulate a target country’s economic development and create a more conducive environment for companies, the investor, and stimulate the local community and economy.
Q: The CSE has relaxed the regulatory framework to facilitate more listings. Would you like to comment on it?
A: The opportunity offered to smaller businesses on the Empower Board and the opportunity given to foreign companies to be listed on the multi currency board are commendable.
Q: How vital is it for an organization to manage its debt-to-equity ratio?
A: Because debt is inherently risky, lenders and investors tend to favour businesses with lower D/E ratios. For lenders, a low ratio means a lower risk of loan default. For shareholders, it means a decreased probability of bankruptcy in the event of an economic downturn. A company with a higher ratio than its industry average, therefore, may have difficulty securing additional funding from either source. Therefore, it is vital for an organization to maintain its debt-to-equity ratio at conservative/manageable levels in order to attract additional funding from equity investors.
Q: How has your company adjusted to the current global environment?
A: We have adjusted well to the global environmental changes. We have realigned our focus to ensure we have the desired business growth with strong partnerships with reputed reinsurers. We have also expanded our operations into Cambodia and Myanmar. The company owns a 45% stake in Serendib Micro Insurance PLC in Cambodia to implement its Micro Insurance business.
Q: How do you foresee the growth of your company going forward?
A: The uncertainties present in the current situation also represents opportunities to insurers. There are considerable opportunities for companies like ours for enhanced penetration of the market and emphasise the need for insurance to the general public. We believe insurance has a very vital role to play in ensuring that the policy holders are protected and their future is secured.
Interview coordinated by Colombo Stock Exchange
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INSIGHTS BY LISTED CORPORATES
The Colombo Stock Exchange(CSE) currently showcases a diverse portfolio of over 295 listed companies across 20 GICS industry groups.
This powerful source of capital raising is attracting more attention amongSri 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.
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