Nawaloka Hospitals Ltd. last week sold 11 percent of the equity of Galadari Hotels (Lanka) PLC to the Employees Provident Fund at Rs. 34 per share booking a fat capital gain but the totality of its near 25% holding of the troubled hotel owning company has not yet been sold, broking sources said.

"We hear that three million shares (of the Nawaloka block) remains,’’ this source said.

Both Asia Securities (Pvt) Ltd., the selling brokers, and Galadari reported this transaction to the CSE in separate filings.

Nawaloka had sold a large block the previous week too at the same Rs. 34 price with the company’s deputy chairman, Mr. Jayantha Dharmadasa, tight-lipped about the capital gain saying ``we have to sell the rest of the shares.’’

He said they had acquired their shares at a price of Rs. 19 each. Analysts said that although these shares had been held for a considerable period, given the price at which the sale had been effected, Nawaloka had done well on the investment.

The Galadari Hotel is in urgent need of refurbishing at an estimated cost of USD 8 million but its major shareholder, Galadari Brothers Company (GBC), has been unwilling to make a fresh cash infusion telling the managers to invest what they could out of internal cash generation.

Last year, Galadari Hotels devised a strategy of reducing debt by issuing new shares to the biggest non-bank debtors, GBC and the Secretary to the Treasury, pricing the shares at Rs. 10 each.

Although Nawaloka did not object to this strategy when the decision was taken last year, it indicated it would not support a resolution to that effect earlier this year.

As the resolution had to be carried with a 75% majority, the strategy of issuing ten-rupee shares to the major debtors and reducing gearing was aborted.

"Given the price the share eventually yielded, backing out of the `shares against debt’ deal also paid Nawaloka,’’ an analyst said.

The state sector including the EPF and other entities have in recent week been making forays into the Colombo stock market acquiring what are perceived to be growth shares chiefly in the banking and hotels sector.

This sector is believed to have been a buyer of the first tranche of Nawaloka-held shares of Galadari disposed the previous week but there has been no confirmation of who the buyer/buyers were.

The sale of its Galadari interest pushed up the Nawaloka share price since the first sale was effected.