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Sri Lanka Equity Forum » Stock Market Talk » Banks Rights Issues has started

Banks Rights Issues has started

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1 Banks Rights Issues has started on Tue Mar 07, 2017 8:30 am

jayathu


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
PABC suceessfully did it, now commercial bank is doing it. Soon HNB, SAMP, DFCC and NDB will do it to raise funds for future growth and further capitalize the banks.

Raising funds through debentures is not an option at the moment due to tax changes. Now only option for banks is to find a private placement or go for a right issue.

2 Re: Banks Rights Issues has started on Tue Mar 07, 2017 10:03 am

hettdas

avatar
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Jayathu , What is the tax imposed on Debentures recently?

3 Re: Banks Rights Issues has started on Tue Mar 07, 2017 10:19 am

jayathu


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
tax exception given fr corporate is gone. Earlier we weren't liable to pay taxes on debenture interest earned.

4 Re: Banks Rights Issues has started on Tue Mar 07, 2017 10:46 am

soileconomy

avatar
Vice President - Equity Analytics
Vice President - Equity Analytics
In an environment where interest rates are going up rights issue is a good option.if valuable shares are going for rights issues ,overall market may go down.

5 Re: Banks Rights Issues has started on Tue Mar 07, 2017 12:18 pm

hettdas

avatar
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
what is the tax percentage for interest of debentures per annum?
Also will this tax effect previous debentures listed before budget?

6 Re: Banks Rights Issues has started on Tue Mar 07, 2017 12:35 pm

jayathu


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@hettdas i work for an insurance company in fund management side. For us corporate tax is 28%. Until now our debenture interest income is not liable for that, but now it's liable. Corporate tax varies according to the different sectors.

So now if we invest in a debenture which gives 14%, our nett return will be 10.08%. So it'll be very unattractive to invest in debentures. Under current T'Bill and T'Bond rate, if a company issues 3yr debenture, they must at least give 19%. Then net return for us is 13.68%, which is comparable for 3yr T'Bond rate. AER might vary according coupon paying method.

7 Re: Banks Rights Issues has started on Tue Mar 07, 2017 1:25 pm

hettdas

avatar
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@jayathu wrote:@hettdas i work for an insurance company in fund management side. For us corporate tax is 28%. Until now our debenture interest income is not liable for that, but now it's liable. Corporate tax varies according to the different sectors.

So now if we invest in a debenture which gives 14%, our nett return will be 10.08%. So it'll be very unattractive to invest in debentures. Under current T'Bill and T'Bond rate, if a company issues 3yr debenture, they must at least give 19%. Then net return for us is 13.68%, which is comparable for 3yr T'Bond rate. AER might vary according coupon paying method.  



Thank you Jayathu. Lets see after April. We can check exact percentage after April since all budget decisions would implement after April 1st.

8 Re: Banks Rights Issues has started on Sat Mar 11, 2017 11:04 pm

anges


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
seems like goverment needs money badly ! may be 2019 will be year ??????????????

9 Re: Banks Rights Issues has started on Sun Mar 12, 2017 2:11 pm

worthiness


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Is debenture interest subject to 28% tax?

10 Re: Banks Rights Issues has started on Mon Mar 13, 2017 8:29 am

jayathu


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Yep, still there's some confusion can the existing debentures we have invested can be or cannot be taxed.

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