Lankan bank gets 80pc stake in Capital Market Services

A Sri Lankan bank, NDB, has signed a deal with Capital Market Services Ltd, powering itself to a majority stakeholder in the local merchant bank.
Under the deal, NDB (National Development Bank) will own about 80 percent stake in Capital Market Services after injecting an additional Tk 8 crore into the firm that had Tk 2 crore in previous paid-up capital.
The operation of the new joint venture on investment banking is expected to start in the first quarter of 2009 under a changed name: NDB Capitals Ltd, people familiar with the issue said yesterday.
NDB, which made the disclosure in a filing to the Colombo Stock Exchange, becomes the third Sri Lankan bank to enter Bangladesh after Commercial Bank of Ceylon and Sampath Bank. Sampath Bank has investment in LankaBangla Finance.
The bank struck the deal after jockeying for probable ties with local firms for more than a year. It said it had conducted a feasibility study to start investment banking in Bangladesh.
In the Web posting, NDB said it received approval from regulatory authorities both in Sri Lanka and Bangladesh to make an investment in Capital Market Services.
“NDB has executed a joint venture agreement with the Capital Market Services and its existing shareholders whereby NDB would acquire a controlling interest of the investee company,” it said.
“The investment would be made in the investee company subject to the fulfilment of pre-investment conditions,” it added.
“We are happy. The deal will help us increase our presence in the capital market,” said Al-Maruf Khan, managing director of Capital Market Services.
Khan hoped NDB's experience in making financial products such as derivatives, commercial papers and securitisation as well as its global network would allow them to provide "efficient services" to local and multinational companies as well as the government.
“We were looking for a strategic investor over the past couple of months. It's good that we have had a good partner,” he said, referring to a regulatory requirement to hike paid-up capital for merchant banks.
In the backdrop of inactivity by nearly half of the 28 merchant banks, the Securities and Exchange Commission reset rules for merchant banking in June with a requirement to raise paid-up capital to Tk 10 crore from Tk 2 crore.
“We haven't sold any share. NDB will invest an additional Tk 8 crore,” said Khan, expecting that the new entity after the deal would start operation in early February.
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