Olam

Olam: its biggest shareholder, Kewalram Singapore, which owns 20.2% of Olam, said it will participate in the US$1.25b sale of bonds and warrants, joining Temasek (with a 16.3% stake) in backing the offering. “As the company’s largest shareholder, we fully support its proposed rights issue of bonds and warrants,” said Kewalram. “We believe that it is in the best interest of the company, and is an attractive investment opportunity for all shareholders, as well as being beneficial to the bondholders. We intend to participate in the proposed rights issue.” Kewalram supports Olam’s strategy, saying, “the configuration of assets and capabilities that it has built up will generate enduring value for its stakeholders.” Separately, over in HK, the HKEx is prohibiting companies that seek approval to list on its stock market in IPOs from relying on an accounting practice at the centre of accusations by short-seller Muddy Waters against Olam. Olam has been criticised by Muddy Waters for the way it accounts for assumed future increases in the value of its crops and other so-called biological assets. Olam CEO Sunny Verghese, has said its accounting is in line with Singapore's financial standards, which are based on IFRS rules, and insist that agricultural assets are valued according to certain models. Analysts have noted biological gains make up an especially large portion of Olam's pre-tax profit. However, Hong Kong Exchanges and Clearing seems to be taking a different view on the practice from its Singapore rival. In a guidance note, the HK bourse said agri companies could not rely on "unrealised fair value gains on valuation of biological assets" to demonstrate a trading and profitability track record, which is required for approval to list shares on the exchange. In practice, that means a cattle farmer, must wait until they are actually sold before booking a profit. The guidance does not, however, apply to companies already listed on the exchange which count on assumed gains in biological assets in their reported profits. "Biological assets are subject to inherent risks and their valuation is usually subject to higher uncertainty due to complex and not easily verifiable assumptions adopted," the exchange wrote. "Allowing an applicant engaging in agricultural activities to use unrealised fair value gains on valuation of biological assets to fulfil the trading record and profit requirements is contrary to the principles of the Listing Rules."