SriLankan Airline decisions on shares of SriLankan Catering defy any sense

SriLankan Airlines officials had not done an evaluation of share value before it bought back 40 mn of SriLankan Catering shares, at Rs. 100 reach, at a cost of Rs. 4 billion, the Presidential Commission of Inquiry (PCoI) on irregularities at SriLankan Airlines, SriLankan Catering and Mihin Lanka was told yesterday.

Nalaka Sanjeewa, Manager-Finance at SriLankan catering told the PCoI that the initially the company had one million shares and that had increased to 100 million in September 2009. Out of the 100 mn, the Board of Directors had decided to buyback 40 mn at Rs 100 each.

The PCoI pointed out that the decision to increase the shares to 100 mn and the one to buy back 40 mn had been taken on the same day. Sanjeewa was asked whether the management had evaluated the value of the shares before buying them back, and Sanjeewa answered in the negative.

“The Board of Directors decided to buy back shares, using the retained earnings of SriLankan catering and the funds from the current account SriLankan Airlines maintains with SriLankan catering,” he said.

It was also revealed that the board of directors had increased the shares of SriLankan catering by another 940 mn the following few years. However, most of the funds from issuing the shares had gone to SriLankan Airlines.

The PCoI then observed that SriLankan catering had not benefited from the increase in the share issuance.