The Government’s plan to merge LAUGFS Gas and the state-owned Litro Gas Company under one banner will lead towards injecting public money in a wasteful Public –Private Partnership to rescue financially ailing LAUGFS Gas, financial analysts said.
Treasury will have to bear the brunt by forming another state owned loss making company following the merger of these two entities, they warned.
Before making a proposal of merger, the responsibility of the treasury should have been to conduct a due diligence and consider pros and cons of the feasibility of such a restructuring process relating to Litro Gas as its balance sheet is also not sound,a leading financial analyst pointed out .
LAUGFS Holdings Group is now shouldering a massive debt burden of Rs.22 billion to two state banks the Bank of Ceylon and the Peoples Bank and local banks consider this entity as a bankrupt company.
If this merger is allowed to go through then it will be considered as the first merger under PPP launched by a government to adsorb a debt of Rs 22 billion in the Global business world , he claimed.
The merger consideration may comprise cash, equity or debt securities, rights, other property, or a combination of any of the foregoing. Merger transactions typically require approval of the boards of directors of the constituent companies and a vote of the shareholders of the constituent companies.
This procedure has also not been followed before taking a cabinet decision to merge the State owned Lito Gas and LAUGFS Gas companies.
LAUGFS Holdings holds 74% stake in LGL and EPF owns 17.3%, and public holding of LGL is 25%, Colombo Stock Exchange (CSE) data revealed.
Imtiaz Buhardeen is one of the leading share holders of the public holding in LAUGFS Gas Limited LGL Buhardeen’s holding in LGL is via Almas Organisation Ltd., and Carlines Holdings Ltd., which as at 30 June was 4.2 million voting shares or 1.12% stake. LAUGFS Holdings holds 74% stake in LGL and EPF owns 17.3%.
Public holding of LGL is 25%. Buhardeen also holds 4.3 million of non-voting shares of LGL.
LAUGFS Gas Plc (LGL) has bounced back to profit in the first half of FY2021 DUE to a strong second quarter. LGL’s first half top line saw 13% growth to Rs. 14.6 billion. In FY20 revenue was Rs. 27.2 billion. First half operating profit was Rs. 1.39 billion s against Rs. 1 billion a year earlier.
As per interim results LGL posted a Group pre-tax profit of Rs. 189 million in the first half of FY21 as against a loss of Rs. 155.3 million. In FY20, the Group suffered a Rs. 1.84 billion loss.
After tax profit in the first six months ended 30 September 2020 was Rs. 221.7 million in comparison to a loss of Rs. 241 million. In FY20 the after tax loss was Rs. 1.7 billion.