Sri Lanka Stock Picks

Sri Lanka stock picks site has been developed to give first hand information with regard to share trading opportunities available for investors who do not like go through lengthy research reports, calculations,etc but to have a clear idea about stocks that have future up side potential.Our service is just not for day traders but for the investors who wish to see their money growing in the long run.Our main objective is to provide information relating to trading under one roof.

Saturday, January 8, 2011

HVA Foods in Rs. 319mn IPO to boost value added tea exports

*Rs.45mn to acquire Helediv brand
*Rs. 95mn to reduce gearing
*Rs. 102mn to upgrade iced tea manufacturing plant
*Rs. 76mn to expand existing facilities, balance to finance working capital

HVA Foods last week announced it would offer a 30 percent stake of the company in an initial public offering (IPO) to raise Rs. 319 million to boost its value added tea exports and explore new markets.

Listing on the Dirisavi Board of the CSE, the company is offering 19,928,598 million ordinary voting shares of the company at the share offer price of Rs. 16 each. The Official opening of the IPO will be on the 12th of January and will be kept open until February 01, unless fully subscribed before that. The minimum subscription has been set at 100 shares and thereon in multiples of 100 of shares applied.

Chairman of HVA Foods Rohan Fernando announced at the launch on Wednesday (5) that the decision to list the company on the CSE was taken to achieve a few objectives, which are given below. In an interview published in The Island Financial Review last December, Fernando said the public offering was the best available option to raise capital given the tight-fistedness of the country’s banking system.

"The first allocation of Rs. 45 million is for the acquisition of HVA Holdings (Private) Limited for the assignment of international brand rights of ‘Heladiv’ to HVA Foods Limited - the transfer of 100 percent ownership of HVA Holdings (Private) Limited to HVA Foods Limited. Hence, the acquisition will now give us total jurisdiction over the brand in Sri Lanka and worldwide covering the manufacture and export of ‘Heladiv’ branded products without hindrance. Moreover, infringement of the brand rights in any foreign country where the brand is registered will also now come under the control of HVA Foods Limited," he said.

"Secondly, approximately Rs. 95 million will be utilized to reduce gearing of the company and another Rs. 102 million will be utilized for the Ice Tea plant to be upgraded from a pilot plant to a commercial plant and for expansion of facilities in the existing factory. As for the expansion of the existing factory, most of the current machines need backups and increased capacity. Our current tea bagging capacity is well below the required demand. Therefore, approximately Rs. 76 million will be utilized for expansion of the current operations," Fernando said.

"The remaining balance will be utilized to finance the 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," he said.

There are almost 80 products being marketed under the ‘Heladiv’ brand which includes a range of flavours and presentations including black tea, green tea, herbal tea, specialty teas, tea concentrate with pure tea extract, fruit base, and various other value added tea products.

The company has now identified ‘ready-to-drink’ iced tea as part of its product portfolio. This product has already been introduced to the local and international markets like Maldives, Australia, USA and New Zealand under the ‘Heladiv’ brand name. The company has also built a special plant called the ‘Heladiv Innovative Centre’, for the manufacturing of this iced tea.

The ‘Heladiv’ brand is registered in 42 countries around the world and has also been the pioneers in developing ready-to-drink iced tea in the Sri Lankan market. "This is a very exciting year for Heladiv as we continue to get closer to our growing number of customers both in Sri Lanka and around the world, and we believe that the IPO is a unique opportunity for our customers and the wider investor community to get even closer to our brand," Fernando said.

"We’re delighted at the level of interest and excitement that the IPO is generating here in Sri Lanka, and we are looking forward to welcoming new investors, retail and institutional alike, to the HVA family," he said.

Under a joint venture agreement with Beijing Pure Ceylon Tea, HVA Foods operates 10 high-end tea boutiques in China. Fernando said the company plans to take the number up to 100 boutiques within three years time. The company is also planning to venture into the Indian market.

source - www.island.lk