The mobile-phone operator is seeking to become only the second Sri Lankan company to be rated by a credit assessor, joining Sri Lanka Telecom Ltd., the nation's biggest fixed-line phone-service provider. A rating serves to indicate a company's ability to pay debt and is a key requirement for overseas funds in assessing investment risk.
"A rating for Dialog will make it even more attractive for international investors," said Namal Kamalgoda, who helps manage the equivalent of $145 million as chief investment officer at Eagle NDB Co., the country's biggest fund. "I rate Dialog as a better run company than Sri Lanka Telecom." The fund owns shares in both companies.
Dialog raised 8.54 billion rupees ($85 million) in the share sale that tested investor confidence in a country ravaged by a two-decade civil war that's left more than 60,000 dead and the Dec. 26 tsunami that killed about 39,000.
Stalled peace talks between the government and Tamil Tiger rebels have cast a shadow on Sri Lanka's $20 billion economy, which grew 4.8 percent in the first quarter from a year earlier.
'Comfort'
Dialog sold shares at 12 rupees each, the upper end of the price range offered to investors, to become Sri Lanka's largest company by market value. A rating may boost its stock further.
Sri Lanka Telecom shares have risen 58 percent in value this year, according to data compiled by Bloomberg, outpacing the 34 percent gain in the Colombo All Share Index. Telecom shares have risen on speculation that Dialog's shares are overpriced, says Prabodha Samarasekera, who helps manage $25 million of assets at National Asset Management in Colombo.
"Telecom shares have risen because short-term investors see Dialog's issue as too high to make a quick return and then there are the longer-term investors who still rate Dialog a good buy," Samarasekera said.
Telekom Malaysia offered a 9.6 percent stake and will get three-fifths of the proceeds from the sale, with the remaining earmarked to fund Dialog's expansion. Dialog allocated overseas investors two-fifths of the stock on offer and the rest went to local investors.
"The only objective we may go for in a rating is to give some comfort to shareholders since we have a wide shareholder base," Wijayasuriya, 37, said in an interview in Colombo on July 25. "We are cash-rich and have no need to borrow."
In January last year, Dialog secured $50 million from the International Finance Corp., which it has yet to use, Wijayasuriya said. Telekom Malaysia has invested more than $200 million in Dialog, setting up infrastructure to expand the mobile network.
The government of Sri Lanka also plans to apply for its first sovereign rating before considering a sale of dollar- denominated bonds, central bank Governor Sunil Mendis said on June 30. The island-nation wants to secure a rating to attract more investments.
Bank Presentations
JPMorgan Chase & Co., Standard Chartered Plc, UBS Warburg, Deutsche Bank AG and Citigroup Inc. in the past made presentations to advise Sri Lanka on obtaining a rating.
Standard & Poor's assigned its first rating to a company from the island last year when it rated Sri Lanka Telecom. S&P rates Sri Lanka Telecom's foreign currency debt B+ and its local currency debt BB-, both junk ratings reflecting the high-yield, high-risk nature of the company's debt.
Dialog's rating will at least match the rating of Sri Lanka Telecom, said Fitch Ratings Lanka Ltd., the local unit of Fitch Ratings.
"For an international rating, the sovereign factor will come in, rating companies would take a call on the country before they look at the company," said Alastair Corera, country head at Fitch Ratings Lanka in Colombo. "In Dialog's case, a rating will improve transparency and give investors another level of review and that can't be bad." - Bloomberg