Sri Lanka Investments

Private Equity Investments in Sri Lanka

Sri Lanka has just ended a civil war that engulfed the island nation for more than a quarter of a century. Despite the turmoil, a private equity firm is seeking to raise $150 million for a fund investing in Sri Lanka. Roman Scott, chairman of Calamander Capital Limited, believes that "the Cinderella story of Asia. Like all Cinderellas, Sri Lanka is the prettiest girl although she works in the kitchen infested with rats."

The Wall Street Journal conducted an interview with Mr. Scott about his private equity firm's decision to invest in Sri Lanka. When asked how he is adjusting to the political risk in a war-torn country he noted that over the last six years has grown faster than all the nations in the Association of Souteast Asian Nations except Vietnam (during a civil war, no less). He added that the Tamil Tiger rebels have been mostly wiped out and therefore pose no threat of reviving the civil war. He does worry about what the economic policy will be though.

Mr. Scott also said that he is trying to attract a diverse group of investors with no more than a third of the limited partners coming from the United States and Europe. He says they will be particularly targeting institutional investors and high-net worth individuals in India. Scott believes Indian investors have a unique understanding of Sri Lanka's story, as India's economy is closely connected to Sri Lanka's.

He justified the choice to invest in commodities saying:

"The demand for soft commodities in Sri Lanka is dependent on Asian demand. For example, demand for rubber is tied to Asian growth and future global growth, and is less tied to Wal-Mart. Demand for tea, for example, is more fundamental. If you have a cup of tea in the morning, the demand is resistant to recession and consumption doesn’t change much. Demand for building and construction products remains strong in Asia, especially as much of the Asian governments’ economic stimulus packages goes into construction projects."

He believes he can create value because almost every company in Sri Lanka is inefficient and poorly capitalized. According to Scott, some firms are using machinery that is a century old and even powered by steam engines. He believes that his private equity firm can bring these underdeveloped companies from the 19th to the 20th century, adding value without the need of much leverage. His exit strategy relies on trade sales to bigger companies in the Asian region.

For the whole interview see the WSJ Story

Tags: Sri Lanka investments, investing in sri lanka, private equity sri lanka, sri lanka private equity investments, sri lanka economy, sri lanka capital

Link to This Resource: Sri Lanka Investments

http://privateequityblogger.com/2009/06/sri-lanka-investments.html