Expolanka Holdings Ltd., Sri Lanka’s little known diversified multinational company operating in 38 cities across 12 countries, is planning to raise a little more than Rs. 2.4 billion through an initial public offering (IPO) which would see 27 percent of its shares listed on the Colombo Stock Exchange.
The offer for 172 million ordinary voting shares at Rs. 14 each opens on May 12 and the subscription list would close on June 2, unless the issue is oversubscribed before then.
The proceeds of the IPO would be put to use almost immediately.
Expolanka Holdings CFO Mushtaq Ahamed speaking to journalists yesterday (26) said the company envisages growth across diverse sectors. "We resorted to bridging finance to fund our strategic expansion plans and the proceeds of the IPO would be used to enhance working capital, retire long term debt and in strategic investments. Growth is coming and it is not limited to Colombo," he said.
Out of the funds raised, the company will utilise Rs. 908 million to reduce outstanding long-term debt amounting to Rs. 1.8 billion. This would be done from August 2011.
Expolanka will use Rs. 1 billion to enhance its working capital of specific entities of the group with a view to increase operating capacity, measured by the volume of activity at its main business segments. The proceeds will be managed by the Corporate Treasury Department of Expolanka Holdings Limited and will be supplied on demand to group entities under a suitable return. The company expects to commence utilising the proceeds from June 2011.
The company will use a further Rs. 500 million to expand its existing warehouse capacity to supplement the group’s expansion into the local transport and logistics sector from September 2011.
According to Expolanka Holdings Group CEO Hanif Yusoof, this Rs. 500 million would be used to design a warehouse on a 4 acre plot of land owned by the group that would cater exclusively to the country’s booming fashion industry, he told journalists in Colombo yesterday (26).
Diversified…
The group’s main line of business is in logistics, accounting for 71 percent of group profits of Rs. 1.92 billion for the nine-months ending December 31, 2010, contributing 53 percent of group revenue amounting to Rs. 25.8 billion for the same period.
Expolanka’s freight forwarding operations are among the fifth largest in India and the biggest in Bangladesh. It recently opened an office in the Philippines and acquired a freight forwarding company that has access to Australia and China, Yusoof said.
The group is also in the commodities exports business, its fresh fruits and fruit drinks being popular in the Middle East. It also exports tea in bulk and value added form. The group also maintains fruit plantations. "Agricultural exports are going to be big. The Middle Eastern market is already there for the taking," Yusoof said.
It also recycles and exports waste-paper and, according to the group it commands a 19 percent market share.
Yusoof said the group had entered into general service agreements with several leading airlines.
Expolanka also operates a BPO. In 2002, HelloCorp was established as the first-ever BOI approved company in Sri Lanka specialising in BPO services, with the initial phases of the operation being customer support and call centre services for overseas clients. HelloCorp specialises in providing Business Process Outsourcing services to clients spread around the world. The focus of the business lies in providing outsourced services such as finance and accounting, data processing, IT tech support, back office processing, managed outsourcing solutions and other BPO services, the prospectus noted.
Asia Pacific Institute of Information Technology APIIT is a joint venture providing higher education to Sri Lankan and foreign students in the academic areas of Business, IT and Law.
"APIIT started operations in September 1999 with BOI approval, to offer tertiary education, in partnership with the Asia Pacific Institute of Information Technology – Malaysia and Staffordshire University, UK."
Language of the future...
The Expolanka group also operates inbound tour operations. Yusoof said the company was employing Chinese, Indians and others who could command languages of the Balkan states. "These are languages of the future," he said explaining the company’s motives for employing those proficient in various languages in order to attract more tourists into the country.
Pharmaceuticals...
The group has also ventured into herbal pharmaceuticals. Yusoof said the group had commenced research and development activities in this regard for the past ten years.
Group Director Sattar Kassim told The Island Financial Review that the group’s pharmaceuticals factory has expanded from a 7,700 sq ft unit into 60,500 sq ft unit today. " We have the country’s only encapsulation plant," he said, adding that the group was investing heavily in this growth sector.
Allocation of shares...
According to the new rules introduced by the SEC, retail investors would be allocated 68.8 million shares, 40 percent of the issue, while institutional investors have been allocated 35 percent of the issue or 60.2 million shares. Expolanka employees have been allocated 15 percent of the issue while unit trust investors have access to 10 percent.
After tax profits for the group reached Rs. 1.45 billion for the nine months ending December 2010; its profits for the previous financial years is as follows; Rs. 192 million (FY06), Rs. 122 million (FY07), Rs. 8 million (FY08), Rs. 391 million (FY09) and Rs. 591 million (FY10).
Net turnover is as follows; Rs. 11.78 million (FY06), Rs. 12.71 million (FY07), Rs. 15.9 million (FY08), Rs. 18.93 million (FY09), Rs. 23.7 million (FY10) and Rs. 25.82 million (nine months ending December 31, 2010).
Future outlook...
Expolanka intends to capitalise on the overall supply chain improvements the country is to experience with the expansion of the rail network to the North and the East. This will provide the inland transportation sub-sector with growth opportunities. Further, better access to these locations coupled with the infrastructure developments taking place in the telecommunications industry, should enable the group to expand its existing Freight Management operations in the telecommunications sector, Expolanka said in its prospectus.
"This will also complement the extension of the warehouse facility the Group is hoping to establish. The warehouse is located in close proximity to a rail reservation. This modernised distribution centre, which is to be fully operational during the year 2012, will provide the Group with the much needed capacity to meet its customer’s demand for storage and logistics services. The group hopes to establish itself firmly on the overall supply chain of customers and strengthening the vertical integration by adopting modern service facilities associated with Third Party Logistics.
"Sri Lanka is well positioned to become a consolidation hub, where goods from India, China and Middle East can be consolidated and exported to Europe and the USA, creating growth opportunities for all freight forward companies in the country. Expolanka with its strong regional presence, experience and infrastructure is ideally placed to take advantage of this opportunity.
"Expolanka’s global network of freight forwarding companies allows the Group to be at the forefront of new developments, offering various new products and services, and has allowed the Group to benefit from synergies in its operations. As a strategic investment option, and with a view to increasing efficiencies, the Company is proposing to establish its own agencies in Europe and the US. In addition to the cost factors, the agencies would be able to improve its business processes by canvassing for business with established buyers as well as sourcing new clients, which will result in improved relationships between parties whilst providing stability to the operations.
"The Travel sub sector has plans to extend its branch network locally by establishing travel offices in strategic locations to facilitate access to travel services to all segments in Sri Lanka there by providing individualised services to walk in clients. In addition, the Company hopes to expand its operations through backward integration with hotel chains to provide sales and marketing activities for their establishments.
"Expolanka is planning to increase production capacity in order to meet the demand for its major export produce items such as pineapple, banana, maze, tapioca and various other vegetables. The Company will also commence exploring various new markets," its prospectus said.
source - www.island.lk
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