THE SRI LANKAN OPPORTUNITY

Since the end of its civil war in 2009, Sri Lanka has enjoyed stability, an increase in its rate of economic growth, and surge in investments in infrastructure by the government and by foreign investors. Sri Lanka’s GDP growth was over 8% in each of 2010 and 2011, 6.5% in 2012, and 7.3% in 2013 and estimated to be 7 % in 2014. Presently, Sri Lanka possesses the necessary conditions for sustained economic growth such as social and political stability, business friendly policies and attractive demographics with medium to long-term GDP growth projections are in the range of 7-8%. Sri Lanka’s continued growth will be propelled by strong investment in infrastructure; a young, well educated and hard-working population; moderate labor costs; and rapidly growing consumer demand due to increasing levels of disposable income. According to a McKinsey study, an estimated USD 80 to 90 billion of private investment, in both equity and debt capital, will be needed over the next 10 years to achieve a 6% to 7% GDP growth rate. It is difficult to fulfill this need through traditional funding methods such as bank borrowings due to their insistence on collateral and lack of credit appetite for some of the sectors. Further, very few equity options exists for companies until an IPO. Many companies in the target market are not IPO ready, due to their smaller size and lack of systems and governance procedures. Therefore, a huge opportunity exist in the market, for NDB Zephyr to invest in these high growth companies, improve them and exit profitably.