Heladiv Foods, a subsidiary of HVA Group is to announce its Initial Public Offering of Rs.319 million to the media today, offering 30 percent stake (19,928,598 Ordinary Voting Shares) of the company to the public at Rs.16.
Speaking to DM Business Heladiv Chairman Rohan Fernando said this was the first time an internationally registered tea brand was offered to the public and tea being one of the most popular beverages in the world, the company had a lot of potential for future growth.
According to the prospectus the company expects to utilize the money raised through the IPO from servicing its debts to upgrade its production facilities.
Rs. 45 million of IPO money will be allocated for the acquisition of HVA Holdings (Private) Limited for the assignment of international brand rights of "HELADIV" to HVA Foods Limited while about Rs.95 million will be utilized to reduce gearing of the Company.
The prospectus further states that about Rs.102 million will be utilized to upgrade an ice tea plant from a pilot plant to a commercial plant and for expansion of facilities in the existing factory.
"The current capacity of the pilot plant is 100,000 litres of ice tea per month. Subject to the current trial shipments and initial marketing efforts bringing in improved orders, the capacity in the medium term needs to be increased to 300,000 litres per month. This will require approximately LKR 26 million which will cover the securing and expansion of land and building and installation of machinery. As for the expansion of the existing factory, most of the current machines need backups and increased capacity. The current tea bagging capacity of the Company is well below the required demand. Hence, approximately LKR 76 million will be utilized for expansion of the current operations" prospectus noted.
The remaining balance would be used for incremental working capital requirements of HVA Foods Limited such as retiring expensive short term borrowings and to ensure smooth and efficient operations at the factory by maintaining adequate buffer stocks.
Heladiv Food Company is currently 99.9% owned by HVA Lanka Exports (Pvt) Ltd, whose stake will fall to 69.99% post IPO, HVA Lanka Exports is controlled by Rohan Fernando, who is the Chairman of HVA too. Varuni Amunugama Fernando (founder and joint MD of Triad Advertising) is a Director of HVA.
For FY10 the company has recorded a net profit of Rs54 million (fully diluted FY10 EPS of Rs0.8) and Rs27 million for 1H11 net profit as opposed to 1H10 net profit of Rs17 million.
source - www.dailymirror.lk
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