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" Take the case of an aluminium cladding fabricating firm that is valued by the market at over Rs700 million now and at over a billion rupees in the past. It reported a Rs1.5 million profit last year following a number of years of losses. “The other day I visited the company,” says Channa De Silva who heads the US based private equity firm LR Global’s Sri Lankan office. “There are only 10 employees working in a leased out property far away from Colombo. It’s a manufacturing sector firm and none of the 10 people were wearing shoes or gloves. So its 10 people in a manufacturing firm quoted in the Colombo Stock Exchange with a market value of around a billion rupees; sounds very interesting, doesn’t it?” he asks.
The firm’s price to earnings ratio is over 280 times and a bank has obtained a judgment against the firm concerning an outstanding loan. A case against non payment of EPF dues is also pending. Its net assets are just Rs60 million despite the market value of the firm having touched 20 times this value this year. “During the year, the directors continued to support the business in the absence of support from any of the financial institutions, in order to meet its basic financial obligations. The company managed to continue paying the accumulated overdue statutory dues of itself and even its subsidiary which were in default due to its financial weakness,” said its Chairman in the last annual report. Clearly, critics argue, investors purchasing shares of this firm are either gullible clowns or scheming villains. "
The firm’s price to earnings ratio is over 280 times and a bank has obtained a judgment against the firm concerning an outstanding loan. A case against non payment of EPF dues is also pending. Its net assets are just Rs60 million despite the market value of the firm having touched 20 times this value this year. “During the year, the directors continued to support the business in the absence of support from any of the financial institutions, in order to meet its basic financial obligations. The company managed to continue paying the accumulated overdue statutory dues of itself and even its subsidiary which were in default due to its financial weakness,” said its Chairman in the last annual report. Clearly, critics argue, investors purchasing shares of this firm are either gullible clowns or scheming villains. "
