The Colombo Stock Exchange has formally approved the Initial Public Offering (IPO) of Hela Apparel Holdings Limited (the holding company of the Hela Clothing Group), with the offer due to open on January 12.
This IPO, by one of Sri Lanka’s leading social-capital focused apparel supply chain solution providers, will offer 267,108,998 new ordinary voting shares to the public at a per-share price of Rs. 15.
The issue, which is being jointly managed by CT CLSA and CAL, plans to raise Rs. 4 billion in equity from the public through the offering of a 20.5% stake in the company, resulting in a projected market capitalisation of Rs. 19.5 billion.
All shareholders will be locked in for a minimum period of six months. Hela’s IPO will mark the first ever IPO by a Sri Lankan apparel manufacturer with a global footprint and the largest public issue by value in over a decade.
Group CEO at Hela Dilanka Jinadasa said, “Over our three decades in the industry, we have evolved into an end-to-end apparel supply chain solution provider with a strong global footprint, particularly in Africa. We work with leading international brands and have built strong relationships with these customers over the years by leveraging our attractive manufacturing footprint across five countries and customer-orientated business model.
“As a social-capital focused company, we were also among the few apparel businesses in Sri Lanka who identified early on that our edge lies in responsible manufacturing and sustainability-focused solutions,” he said.
At Rs. 15.00, the implied price-to-earnings ratio (PER) based on forecasted earnings for the current financial year (FY22) stands at 10.5X, compared with the 12.9X market-cap-weighted average PER of local peers. Revenues are generated in USD with a revenue forecast of USD 270 million for the current financial year. The company employs over 18,000 people globally and has an employee stock ownership plan (ESOP) in place, with management accounting for a significant stake in the company.
Outlining how the capital generated by the IPO will be deployed, Jinadasa said, “We are embarking on an ambitious plan for strategic and profitable growth, with a focus on leveraging technology and further strengthening our supply chain. Thus, we plan to allocate approximately Rs. 1 billion towards an investment in a fabric mill, Rs. 0.6 billion towards beefing up our core digital systems through the implementation of a new SAP ERP system, and Rs. 2 billion towards strengthening our balance sheet by settling existing debt to support future expansion. In addition to this, we also plan to allocate Rs. 0.4 billion towards automation-related capital expenditure to improve productivity and efficiency.”