Keells to Invest $100 Million in Sri Lanka Hotels

Date: Thursday, November 26, 2009
Author: Liza Lin and Anusha Ondaatjie, Bloomberg.com

John Keells Holdings Plc., Sri Lanka’s biggest diversified company, plans to invest about $100 million building new resorts to benefit from an economic resurgence after the end of the South Asian island’s civil war.

The Colombo-based company plans to build at least five new hotels in Sri Lanka over the next three years to double its room capacity from 650, Deputy Chairman Ajit Gunewardene said in an interview yesterday.

“Most of our businesses are structured to take advantage of the uptick in the economy,” Gunewardene said. “The immediate boost will come from the leisure sector.”

The island’s $41 billion economy may expand as much as 6 percent next year after growth of about 3.5 percent in 2009, Central Bank of Sri Lanka Governor Nivard Cabraal said Oct. 6. Tourist arrivals in Sri Lanka have grown since June, a month after government forces ended the Liberation Tigers of Tamil Eelams’ 26-year quest for a separate homeland.

Gunewardene said Keells will begin constructing a 190-room hotel on Sri Lanka’s western beaches by April and add two new properties on the island’s east coast.

“At this point in time, we have no requirement for raising funds,” he said. “We have the capacity to invest significant amounts into the economy.”

Rajaratnam’s Stake

Gunewardene said John Keells Holdings hasn’t heard anything from U.S. hedge fund investor Raj Rajaratnam about selling his personal stake in the company. Rajaratnam invested in his own name in 2002.

“He hasn’t indicated anything. As far as we know he has no desire to sell his stake,” Gunewardene said. “We are very comfortable with our overall shareholder base.”

Brokers are talking to Galleon Group founder Rajaratnam about buying his stake in John Keells Holdings Plc, Sri Lanka’s most valuable company, Channa de Silva, director general of Sri Lanka’s securities regulator, said yesterday. Rajaratnam, 52, the founder of Galleon, has been charged with insider trading in the U.S.

“A lot of local institutions are ready to buy his shares because all of them are solid, good companies, blue chips,” de Silva said.

Residential Properties

Gunewardene said the central bank’s easing monetary policy, which has reduced interest rates to a five-year low, will also help boost demand for residential properties and expansion at Keells’ property development unit by the second-half of next year.

“There is significant upside potential for the year ending 2011,” Gunewardene said.

Keells, which also owns a container terminal at the Colombo port and resorts in the Maldives, among others, reported fiscal second-quarter profit declined 43 percent to 575 million rupees ($5 million).

Shares of John Keells, Sri Lanka’s most valuable company, have almost tripled this year, compared with a 90 percent rise in the benchmark Colombo All-Share Index.

To contact the reporters on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net; Liza Lin in Singapore at llin15@bloomberg.net