John Keells Holdings, one of the country’s biggest conglomerates, despite recent investments of Rs. 4 billion boosting its holdings in Union Assurance, Ceylon Cold Stores, John Keells plc and South Asia Gateway Terminals retains a strong balance sheet and capacity for further investment, Mr. Ajith Gunawardene, JKH’s deputy chairman, said on Friday.

``Our balance sheet is still strong and we have the capacity to invest,’’ he said. ``We haven’t exhausted our investment capacity against our balance sheet.’’

But he stressed that investment will be carefully done ``in accordance with our overall capacity.’’

A mandatory offer for the balance shares of Union Assurance is pending and if this is taken up in full, there will be a liability of around Rs. 100 million more, company sources said.

In addition to cash held in short term investments, JKH also has a USD 75 million nine-year loan from International Finance Corporation (IFC), a World Bank affiliate, at Libor plus 2.75%.

According to the last interim report of the company, JKH held Rs. 17.2 billion in short term investments in its books as at Dec. 31, 2008. But there was a corresponding liability of nearly Rs. 15.1 billion largely on account of the draw down on the IFC loan on which there is an interest advantage.

Company sources said that this loan was drawn down in order to lock-in the interest rate payable to the lender.

``If we hadn’t done that, given current conditions the rate would have gone up by now,’’ he explained.

JKH became cash rich by floating a pricey rights issue which was fully subscribed, subsequently sweetened with a bonus, through which it infused a huge tranch of zero cost cash into the company.

Factoring the bonus, the shares cost subscribers around Rs. 122 per share. The JKH share has now slumped to less than half that level trading at around Rs. 56-57 last week forcing some shareholders who borrowed to take their rights to sell at a loss because of the interest cost.