As minority shareholders of Commercial Bank, many of us are deeply concerned about a "Holding Company" that the above institutions are trying to form. So far, all we have been told is that a holding company will be formed to own these two institutions.

We shareholders of Commercial Bank do not see any need for Commercial Bank to go for this move. We do not see any benefit accruing to Commercial Bank either. Commercial Bank has been performing very well, is very strong, and we have been receiving good dividends and bonuses. The real value of our shares is definitely much higher than the present market price.

DFCC on the other hand, is not doing so well. Once the holding company is formed, its shares will certainly not reflect the value of the Commercial Bank shares, but will be diluted to some extent due to the lower DFCC share values. Obviously, we stand to lose the value of our investment.

Since Commercial Bank does not stand to gain from this "alliance" and we shareholders don’t stand to gain from it either, it is interesting to see who stands to benefit.

As the shareholders are yet to be adequately enlightened on the move, one could only imagine what would happen.

Perhaps, in order to hold the two institutions, the new company will have to buy the existing shares of the Commercial Bank and DFCC. We may have no choice but to sell our Commercial Bank shares and buy the holding company’s shares, which we do not want. Perhaps Commercial Bank and DFCC are keen to sell their shares to the holding company. In the process, they may even receive payment from the holding company for the shares that they presently own. Perhaps this is why these institutions are so keen to form this holding company. If this is so, we would recover our money too, but why should we be compelled to sell at a loss?

Having so recovered their monies invested in each other, these two institutions will continue to be owners of the two institutions, using public money raised by the new company. Here again, since Commercial Bank owns only 7percent of DFCC (according to newspapers) and DFCC owns over 29percent of Commercial Bank, it is DFCC, who really stands to gain more from this move.

It would be interesting to see, what the major shareholder, Sri Lanka Insurance Corporation who own 30percent does in this episode. While DFCC who came into the picture only recently will be very happy to recover monies invested (and yet own the companies), would Insurance Corporation, who have been long standing major shareholders of Commercial Bank merely stand back and cheer as the winners go by, and be satisfied with exchanging their strong Commercial Bank-shares for weaker shares of the new company? This investment we believe is public money, and it is hoped that the decision makers would act responsibly.

Just as much as we minority shareholders do not stand to benefit from this move, we do not see Sri Lanka Insurance Corporation benefiting either. Yet, if they too decide to play along, one could not help but wonder if some individual or individuals have a personal interest for some unknown reason.

The Central Bank authorities should also consider the plight of minority shareholders before approving moves of this nature. If majority shareholders are allowed to play games just because they are big, bulldozing their way and forcing minority shareholders to be at their mercy, then there may not be "small investors" in equity in the future.

On the other hand, Commercial Bank should be advised to continue with their business undisturbed, which they are doing very well now, and DFCC should be advised to concentrate on development, the purpose they were incorporated for. Like what was reportedly said by a Central Bank official recently, it is the two development banks that should get together for the benefit of the country. If they did their job well, by now our country would have had several hundreds of small industries. It is not too late to begin. Take our neighbour India for example.

We sincerely hope that Central Bank would advise these two institutions to work individually, each concentrating on their respective activities, rather than encourage them to create a precedence in the market. Else, Central Bank would be encouraging other big companies too to take a cue from DFCC on how to recover investments while continuing to own companies, while we small investors are left in the lurch, thus driving us away from the market in the future, which is undoubtedly against the visions and aims of those who want to activate and popularize the equity market for the benefit of the country.
Claude Fernando
Wellawatte