Arjun Aloysius: The James Bond of

bond business
By Namini Wijedasa-Sunday, December 04, 2016

Just three
days after last years presidential election, someone predicted the
Perpetual Treasuries Ltd (PTL) bond issue on an online website for
stock market investors.
The man wrote on Sri Lanka Equity Forum:Perpetual Treasuries
owned by Free Lanka Capital Holdings owners will mostly get a
large amount of business volumes of Treasury Bills and Treasury
Bonds business in new Yahapalana Government of MaithripalaRanil Regime since new Governor of Central Bank is tipped to be
Free Lanka Capitals driving force Arjun Aloysiuss father-in-law
Arjuna Mahendran who is also the top Economic Advisor of Ranil
Wickramasinghe [sic] since old times.
The new Cabinet had not even been sworn in. The prognosis for
the new President and his Government was excellent. They had
campaigned on a platform of good governance, meritocracy,
transparency and freedom from corruption. There was every
confidence that appointments to key positions would reflect those
principles. Any suggestion of the sort Business Basil made on
Equity Forum seemed unwarranted, premature and wholly
speculative.
But he was proved right at the Central Bank bond auction of late
February 2015. The Government was not two months old when
the storm broke. The allegation is that PTL benefited at the
auction from a combination of insider information and a late
decision to issue an unprecedented volume of bonds.

For those of us who knew how Perpetual did business, it didnt

come as a total shock, said one investment management source.
They were connected with pumping up stocks and dumping them
at high prices on the Employees Provident Fund, which appeared
to be a willing participant in this scheme. What shook us was that
the new Government had also allowed what had happened at the
bond auction.
This article was researched over a period of several weeks. Many
of those approached for information ran scared. One said that the
subject was a time bomb and that he wanted nothing to do with
it. Some laughed when asked about Perpetuals business
practices.
Those who agreed to be interviewed asked to remain anonymous.
Every one of them maintained that 33-year-old Mr Aloysius was
well-connected, both with the previous administration and the
incumbent Government. Finance Minister Ravi Karunanayakes
name came up frequently, although he himself denied any
special relationship with the young man.
The Sunday Times messaged Arjuna Mahendran with an offer to
interview his son-in-law. He replied that it was unlikely Mr Aloysius
would agree. A note sent again this week went unanswered. We
also wrote to Mr Aloysius at an email address provided by his
secretary. An employee replied that he will do his best to meet our
request for an interview once he had spoken with Mr Aloysius.
Arjun is a dealmaker, said an investment analyst. He gets
things done by using contacts, forging alliances, or by other
means. This is a man who was smart enough to install Ajith Nivard
Cabraals sister in one of his companies while he (Cabraal) was
Governor of the Central Bank.
Siromi Wickramasinghe was a director of Perpetual Capital
Holdings Ltd (PCHL), which is Perpetual Treasuries owning
company, from December 2013-March 2015. It was alleged that
PTL had gained undue advantage from this connection. In
defence, Mrs Wickramasinghe said she had never been a director

of Perpetual Treasuries Ltd or been involved in any transaction or

bid made by that specific company.
Mr Aloysiuss camp also resorts to technicalities whenever the
issue of conflict-of-interest is raised. He wasnt a director of PTL
when the controversial bond auction took place, it claims. This is
true. He resigned on January 16, 2015, a week before Mr
Mahendran was appointed CBSL Governor. But he has retained
other positions in the Group and clearly his influence. Any
separation of interests is only on paper.
Investment banker Arjuna Mahendran is the son of Charlie
Mahendran, a retired Foreign Service diplomat who had joined the
United National Party after returning from his last posting as
Ambassador to China. When Ranil Wickremesinghe became
Premier in 2001, the senior Mahendran went to New York as Sri
Lankas Permanent Representative to the United Nations.
Arjuna, the son, was simultaneously made Chairman of the Board
of Investment (BOI). And again, in January 2015, he was
appointed CBSL Governor eleven days after the SirsenaWickremesinghe Cabinet was installed. The most well-intentioned
warnings about glaring conflict of interest were ignored.
The wedding of Anjali Mahendran and Arjun Aloysius had taken
place in 2012, one year before PTL was licensed as a primary
dealer. The bride was Hindu; the grooms family, staunchly
Catholic. They even had the Borella All Saints church repainted in
white at their cost for the marriage ceremony which was
conducted by Joseph Spiteri, Apostolic Nuncio to Sri Lanka.
Arjun is the grandson of Kattar Aloysius, who started out as a dry
fish exporter and ended up as one of the countrys most
successful businessman. He founded the Free Lanka Group and
was a significant shareholder in several companies at the time of
his death in 2013. There is a website dedicated to the extended
Kattar family which hails from South India. It shows that Kattar
Aloysius, whom they call the patriarch, was much loved and
respected.

The senior Aloysius was close to Ranasinghe Premadasa.

However, a clear distinction must be drawn here between Kattar
Aloysius and Aloysius Mudalali whose real name was
Samerasekara Mahamalika Aarachige (S M A) Aloysius and who
had much deeper connections, including political, with Mr
Premadasa. There was no business or family tie between Kattar
Aloysius and Aloysius Mudalali.
A member of the late Presidents administration said he (the
administrator) first came to know the businessman in 1977, when
Mr Premadasa became Prime Minister. Mr Aloysius had good
public relations skills, was a great networker and would often
assist Mr Premadasa for free, such as helping with food at certain

functions or renovating a favourite bungalow in

Yala.

He got up each morning at 4.30 and attended church, this

official said. He wouldnt start the day without a swim. I liked him
because he was religious, honest and likeable.
The administrator felt the senior Aloysius would have been
devastated at the recent turn of events. He also said the old man,
towards the end of his life, had expressed disappointment about
the direction in which some aspects of his business were being
driven. His son Geoffrey Aloysius is Arjuns father and remains a
director of PTL. His other son, Godfrey, was also a director but
resigned four weeks before the bond scandal.
The Kattar website (kept alive by various relatives scattered
around the world, particularly Canada) records special moments
in the lives of the extended family. It provides a window into a
deeply devout and united Catholic clan that starts and ends every
special occasion with prayer. Several of its members are Catholic
priests and nuns. They meet frequently at Christenings, birthdays,
memorials, funerals and weddings.
But the page that once published the photographs of Arjun and
Anjalis marriage has been removed. And they are notably absent
from the site. In fact, neither Arjun nor Anjali have notable
internet footprints. That latters Instagram account is private.
Even photographs that were once available via a simple Google
search are no longer to be seen.
This reticence has helped create an aura of secrecy around Mr
Arjun Aloysius. Even at the height of the controversial pump-anddump market operation in 2011-2012, neither he nor his company
were openly identified by the regulator as being part of the wellconnected stock market mafia. Those it did name were
prominent businessmen with public personas. Many had granted
interviews, given speeches, attended functions, appeared on
television and are widely documented on the internet.
By contrast, Mr Aloysius, then still in his twenties, has remained
well under the radar. In 2012, he was selected to be a member of
the Global Shapers Colombo Hub. At 27, he presented a glowing

bio-data and appeared to be a young entrepreneur from

Colombo who was doing really well, that understood the market
as well as the business environment.
He was to have attended the World Economic Forum with nine
other young Sri Lankans. But this didnt happen. He came for the
first day, didnt contribute and didnt participate, said someone
closely associated with the event. He attended two meetings,
said he didnt want to be part of it and left. But he did have an
amazing profile and was an emerging millionaire.
He might write a cracker CVwe have not seen itbut Mr Aloysius
played up in school. He was compelled to leave one international
school prematurely because the principal found him a difficult
prospect. He then had to quit the next international school he was
enrolled in because that principal, too, thought him incorrigible.
He gained just two passes at the London GCE O/Levels in maths
and English.
A close friend of his, when asked about Mr Aloysius, said he was
a bit naughty in school at times, but so was I. He called him
ambitious, intelligent, a hard and diligent worker and not a thief.
I know that there are many people who have said stuff about him
or who didnt quite appreciate the way he went about things, he
said. But I think that as long as we act within the confines of the
law, we should admire those who challenge the status quo and go
about things in a different way.
I think its important to always have a moral compass when we
go about things, he continued. But people are in business for
profit not for charity. So we have to see it in that way too.
We know from the letters of demand Mr Aloysius recently sent two
media companies that he holds a bachelors degree in business
from the Bond University in Australia (and, no, the irony was not
lost on anyone). Online discussion boards about Australian
universities say Bond, while it has greatly improved its reputation
in recent years, had once been called the rich kid university.

Mr Aloysiuss results at Bond are not known. In any case,

academic achievement is not necessarily a fair parameter. At 21,
he was made consultant to the Free Lanka Group. At 28, he was
CEO of Perpetual Asset Managementas PCHL is still officially
knownand Deputy Chairman of W M Mendis and Company as
well as a board member of Housing Development Finance
Corporation (HDFC).
Mr Aloysius had entered both Mendis and HDFC boards by virtue
of Perpetual Capital acquiring large stakes in each. In May 2011,
he became a director of HDFC as Perpetual was among the top
five shareholders of the bank in which the National Housing
Development Authority held the controlling stake. (Siromi
Wickramasinghe was Chairperson at the time). The same year,
Perpetual bought the controlling interest of Mendis for a reported
one billion rupees or more.
Market sources say it was his grandfather that facilitated Mr
Aloysiuss entry into the stock market, by either giving him some
shares or access to the sale proceeds of those shares. It started
out well. But Perpetual soon edged into murky territory. It started
targeting a complicit EPF as a dumping ground for inflated shares.
Perpetual Capital and Perpetual Asset Management quietly joined
a tiny posse that was helping to pump up the value of certain
shares and unload them on to the EPF. Two of these were Ceylon
Grain Elevators (GRAN) and Lanka Orix Leasing Company (LOLC).
There was a sort of an insider ring being created with certain
people within the EPF and the Central Bank, said an authoritative
source, strictly on condition of anonymity.
Harsha de Silva, then an opposition legislator, was among the first
to point out that the EPF was investing in non-blue chip
companies in a questionable manner. For instance, Perpetual
acquired shares of GRAN for around 50-80 rupees each at the end
of 2010. On March 3-4 the following year, EPF bought five million
of these shares from Perpetual at Rs 205. The price then fell
dramatically to original levels, slaying everyone else that had put

money into GRAN after having observed it rise (artificially) in

value.
Among those affected in a similar manner were some friends of
Mr Aloysius. After helping to inflate orpump up the prices, they
lost millions when the share prices plummeted following his sales.
Some of these shares were taken up to 500% to sell to EPF, said
one stockbroker. Then the price crashed back to the original
level. Perpetual was playing this game in the stock market,
said another. Only when that bubble burst did they shift their
attention to the bond market.
Perpetual Asset Management employed a similar strategy to sell
shares of LOLC to EPF and Bank of Ceylon. A study of historic
stock market data, including daily price sheets and trading
information, reveals much of the above. One stockbroker
estimated that Perpetual made Rs 700-800 million profit from
each or about Rs 1.5 billion from both.
Also in 2011, Perpetual Capital acquired a large stake in Lanka
Ashok Leyland held by an investor named Saliya Perera. This
longstanding shareholder had bought 27.8 percent of the
company over a period of time. But he was in debt to a private
bank.
Perpetual arranged with the bank to repossess a section of Mr
Pereras bloc. The bank force-sold around 12 percent of Saliyas
stake to Perpetual at a massive discount, a stockbroker said. The
share was trading at Rs. 3000 when Perpetual lapped it up at Rs.
1000, causing shockwaves in the industry.
The sale was carried out ostensibly to settle Mr Pereras dues. But
he confided to a friend that the bank had disposed of far more
than necessary.
He said he was not someone who got angry, his confidant
told the Sunday Times. He also said greed was Satan and that
those responsible will have to answer to God. He was taking deep
breaths. He was sad about losing something he had collected for

so many years. Days later, Mr Pereraa bubbly, self-made

mandied of a heart attack. He was in his early 50s.
By now, Perpetual had substantial stakes in HDFC, Central
Finance, Lanka Ashok Leyland, Bairaha Farms, LOLC, DIMO and
CIC Holdings. As reported above, it also took control of liquor
manufacturer W M Mendis and Co.
Those acquainted with Mr Arjun Aloysius say he spoke freely
about how Perpetual had engineered the Leyland and Mendis
acquisitions. But analysts also observe that he could have earned
substantially more on the stock exchange had he sold Perpetuals
stakes in some companies when the respective share prices were
peaking. Why, they ask, does he hold on to certain portfolios and
divest of them when the market is down?
Looking at the numbers, this is how Perpetual Capital made
losses on Bairaha which it sold in stages up to mid-2015,said an
investor who studies trends. Im not entirely convinced that they
are smart investors who do their research well.
They made headlines in March 2011 with a 1.5 billion rupee
stake in Central Finance (CFIN) under Perpetual Capital along with
around 800 million rupees under Thurston Investments which is
also theirs, this investor said. They could have sold CFIN for
double the money in May 2011, just a few months later. But, like
with Bairaha, they chose to hold on.
They had opportunity to sell CFIN for a decent profit until
October that year and could have made at least 20 percent after
August 2014, he continued. Now its down again with little
hope, it seems, of recovering.
Perpetual made a lot of its money by establishing connections
one way or the otherand flogging certain shares at high prices.
If you have connections, you can sell to anyone, the investor
said. You dont need half a brain to do that. These are deals. If
you know someone who knows someone, you can make it
happen.

The well-documented Central Bank bond issue gave Perpetual

another windfall. In August 2016, the Group started buying
National Development Bank (NDB) shares using two margin
trading accounts: Waldock Mackenzie/Perpetual and Union
Bank/Perpetual. They first collected small quantities, then
expanded volumes gradually. The two main companies that hold
NDB shares are Perpetual Equities and Perpetual Treasuries.
Recently, Union Bank/Perpetual Equities unloaded around 3.9
million NDB shares to Perpetual Equities through a private
transfer. Then, Perpetual Equities sold 1.2 million of these shares
to Perpetual Treasuries. Ultimately, they are unloading shares to
Perpetual Treasuries, an authoritative source said. The motive is
not too clear. However, there is nothing illegal from the point of
view of the capital market.
Incidentally, Perpetuals recent investment in NDB is already
down by ten percent. They typically have a deal portfolio that
they flip to the EPF at multiples of the market price, said a senior
stockbroking source. And they have a separate strategic
portfolio.
Perpetual is now expanding still further. There is speculation that
it wants to buy a stock brokerage (Religare Capital Markets has
been mentioned). It is eyeing a television station. Journalists are
already being recruited for a national newspaper project.
It is also open secret that Mr Aloysius has been helping to keep
afloat a newspaper house which has been in financial difficulties
for months on end. He even has an in-house representative, a
General Manager named Mahesh Senanayake, who told editorial
staff that his task was to protect his investors interests.
The money, around Rs 1 million a month, comes in via Perpetual
Group advertisements. Employees recently went unpaid for two
months after the money failed to come in. Around this time,
stories related to the Committee on Public Enterprises (COPE)
report on the bond issue were published. Some members of the
Sinhala language edition went public on websites demanding Mr

Aloysius to remunerate the staff. A million was invested again last

month.
There is no sign of any action being taken against anyone
regarding the 2015 bond scam. The consensus was that Mr
Aloysiuss connectionsthrough his father-in-law and of his own
makingare too strong. One source related how he had hired a
limousine for an influential Government minister in London last
year, during an investment road show.
The minister wanted to eat Chinese food but the restaurant at
the hotel wasnt that great, he narrated. So, Arjun Aloysius took
the minister out to dinner in his limousine to China Town. Thats
just the tip of the iceberg. He nurtures his relationships and was
frequently seen with him during last years campaign for the
parliamentary election.
He has covered his bases, whatever the party, agreed a senior
political source. He is confident enough.
Posted by Thavam