First Capital Holdings PLC has established itself as a prominent player in the financial services sector, with a legacy that spans over four decades. Being a pioneering investment institution and a leading institution in non-bank primary dealing appointed by the Central Bank of Sri Lanka, the company aims to serve as a catalyst for growth in capital markets. With a “Performance-First” ethos, First Capital envisions to improving the lives of all Sri Lankans through innovative financial solutions. Featuring a diverse portfolio that includes investment banking, asset management and capital markets, the company plays a pivotal role in driving economic growth and supporting businesses across various industries. First Capital has garnered significant recognition within the industry, including the prestigious title of Most Valuable Consumer Brand in the Investment Banking Sector awarded by Brand Finance. The organisation also received the Gold Award for its Annual Report in the Investment Banking Sector at the Chartered Accountants Sri Lanka TAGS Awards. Additionally, First Capital has achieved two Silver Awards at the CFA Society Sri Lanka Capital Market Awards, honouring its flagship Unit Trust Fund and outstanding Equity Research efforts. These accolades reflect First Capital’s commitment to excellence and innovation in the investment banking landscape.
International Investor Magazine recently sat down with Dilshan Wirasekara, Managing Director and CEO of First Capital Holdings PLC. Dilshan was recently honoured with the “Financial CEO of the Year Sri Lanka 2024” award, while First Capital Holdings secured the title of “Best Comprehensive Investment Firm Sri Lanka 2024.”
Dilshan has over 28 years of extensive experience in financial services, and since joining First Capital in 2013, he has guided the company to become a major player in Sri Lanka’s capital markets. He has overseen the expansion of its services to include government securities, stock broking, unit trusts, wealth management, debt structuring, and corporate finance advisory, all supported by a robust research division. His leadership has also been central to several large-scale debt structuring transactions and strategic partnerships with global institutions. An alumnus of INSEAD Business School, France, and AOTS, Tokyo, Japan, Dilshan is also the Chairman of the Colombo Stock Exchange.
Discussing the potential of Sri Lanka’s capital markets, Dilshan offers valuable insights into the opportunities that lie ahead.
The Current Landscape and the Opportunity
“Sri Lanka’s capital markets are an undervalued treasure chest, with untapped potential. Currently, the market trades at a price-to-earnings (PE) ratio of 8.0 and a price-to-book (PBV) ratio of 0.90, both of which are significantly below historical highs of 17 times PE and 1.5 times PBV. This presents a prime opportunity for investors to tap into its immense growth potential. The Colombo Stock Exchange (CSE) is on the cusp of a significant upswing in 2024, buoyed by a broader economic revival in Sri Lanka. The numbers tell the story - With the All Share Price Index (ASPI) up 11% and the S&P SL20 index rising 13% as at 3Q2024, investor enthusiasm is palpable. Daily turnover has skyrocketed from LKR 715 million in January to LKR 1.7 billion by September, indicating heightened investor engagement.
Sri Lanka’s external debt restructuring nearing completion and the anticipated removal of its default status, alongside a robust 5.3% GDP growth in early 2024, the stage is set for a surge in foreign investment.
Sri Lanka’s financial landscape is undergoing a dramatic turnaround as previously sky-high fixed income yields—exceeding 20%—start to taper off. With the Central Bank of Sri Lanka cutting policy rates and the Average Weighted Prime Lending Rate (AWPLR) approaching 9.0%, equities are making a strong comeback while the bond markets giving you trading opportunities. “
2024 and Beyond: IPOs, Bonds, and New Listing Opportunities
“As of 2024, and looking forward, favourable conditions promise improved valuations and appealing equity multiples, while rising IPO interest and innovative financial instruments like sustainable bonds, infrastructure bonds and Sukuks offer diverse fundraising opportunities. The CSE is set to shine with its versatile listing boards—Main Board, Diri Savi Board, and Empower Board—plus exciting additions like the Multi Currency Board for foreign listings. New equity products, such as stock borrowing and lending, will enhance market liquidity and investor flexibility.
The Sri Lankan bond market has seen a rollercoaster ride in recent years, with investors navigating through periods of both opportunity and uncertainty. While the local bond market and corporate debt market have historically offered attractive yields and diversification benefits, several factors have influenced investor sentiment and market dynamics.
One of the most significant challenges faced by investors was the fear of a local debt restructuring. This refers to the government’s potential actions to restructure or reduce its debt burden, which can have a profound impact on bond prices and interest rates. The anticipation of such a move pushed yields to a level beyond 20%, making investors hesitant to invest in government securities.
However, a turning point came when the government announced a limited local debt restructuring plan that would only affect provident funds. This announcement provided much-needed clarity and eased investor concerns, leading to a sharp decline in interest rates. Within a short period, rates dropped from a high of 30% to 12.00%, creating a favourable environment for investors to reap higher returns.
First Capital advised clients to invest and take advantage of the high interest rate offered by government securities. We also analysed the impact of the local debt restructuring precisely through our in-house research arm, enabled our organisation and our valuable clients to investment in government securities to achieve a higher return. Being the pioneers in raising funds though government securities to support the government of Sri Lanka. Our foresight in interest rate movement helps us to advise our clients in raising as well as investing in fixed income securities.
The outlook remains positive for both government securities and corporate debt market as all economic indicators are signalling towards a strong growth trajectory. The governments commitment to remain in the IMF programme and the positive signs of concluding the external debt restructuring process will enable Sri Lanka to improve its current credit ratings from the ‘Restricted Default’ (RD) status. This will boost foreign investor confidence, and we believe that foreign investor interest in Sri Lanka will improve. “
Regulatory Changes and Infrastructure Upgrades
“By 2025, the Securities and Exchange Commission (SEC) plans to roll out a cutting-edge market surveillance system in partnership with Nasdaq, designed to detect trading anomalies and ensure fairness. In a nod to global sustainable finance trends, the Colombo Stock Exchange (CSE) is developing a framework for carbon credit derivatives and launching an ESG index, positioning Sri Lanka as a key player in the ESG investment arena.
Recent amendment to CSE listing rules and the updated SEC Act are tightening investor protections, curbing insider trading, and ensuring transparency. The introduction of an independent Dispute Resolution Committee (DRC) will also ensure that investor concerns are addressed fairly.
Sri Lanka’s capital markets are undergoing significant transformations. New regulations, technologies, and infrastructure upgrades are improving market surveillance, promoting sustainability, and introducing innovative financial products. These advancements aim to attract investors, reduce risks, and enhance market efficiency. While challenges persist, the overall outlook for Sri Lanka’s capital markets is positive. “
First Capital, as a leading innovator in Sri Lanka’s capital markets, excels in providing expert guidance to investors. The team is dedicated to helping clients navigate the complexities of the market, leveraging deep insights to maximize returns while implementing robust risk management strategies. With a wealth of experience that spans more than forty two years, First Capital understands the unique dynamics of the Sri Lankan capital market and offers clients tailor-made investment solutions that align with their financial goals and risk tolerance. With First Capital, investors can navigate the market with confidence, assured that they have a trusted partner dedicated to their success.
