Wednesday, October 17, 2012

Colonial Motors to raise Rs. 197.6 m via Rights to boost new Mazda biz, working capital

■ Post Rights, subdivision of shares by 10 for 7 proposed

Colombo Motors Plc has decided to raise Rs. 197.6 million via a Rights Issue to boost its newly-acquired authorised distributorship of Mazda brand as well as working capital.

 The Rights Issue will be on the basis of one for every six shares held at Rs. 130 per share. It will involve issuance of 1,520,710 new shares.

The stated capital of the company is Rs. 91.35 million.

 The pricing of the rights was described as “fair and reasonable”.

Yesterday Colonial Motors share price dipped by Rs. 32.50 to Rs. 185.50 after a hitting a high of Rs. 223. Around 8,800 shares traded. Net asset value per share at company level si Rs. 145.22 and at Group level it is Rs. 293.95.

 Colonial said Rs. 135 million out of the total to be raised will be to invest in the wholly-owned subsidiary Colonial Motors (Ceylon) Ltd., the authorised distributor for Mazda vehicles in Sri Lanka and the Maldives, and in setting up a modern workshop at Battaramulla. The other Mazda distributor is Carmart Ltd.

 The balance Rs. 62.69 million will be used for working capital requirements of Colombo Motors.
 Post full subscription of the Rights Issue, the Colonial Motors Board has proposed to subdivide the shares on the basis of 10 for every 7. This will see the number of shares in issue of the company at 15.2 million.

 Both moves are subject to regulatory and shareholder approval.

 Colombo Fort Land and Building owns a 63.45% stake in Colonial Motors whilst related party Lankem Ceylon holds 2.23%. A few other related parties also hold minor stakes. The biggest outside shareholder is Sri Lanka Insurance Corp with 4.38% as at June 2012.

 Colonial Motors Group is also the agency for popular brand Kia and in the first quarter of FY13 saw its Group post tax profit improve by 26% to Rs. 181 million whilst net profit attributable to equity holders was Rs. 130.5 million, marginally down from Rs. 143 million in the first quarter of FY12.

 Following the hike in import duties, the motor trade has been suffering with low sales and profitability after enjoying a two-year boom under the previous regime of low taxation.

 Group sales were down by 62% to Rs. 460 million in 1Q of FY13 from Rs. 1.19 billion a year earlier. In full FY12, Group sales grew by 163% to Rs. 3.96 billion whilst net profit soared by 401% to Rs. 1.16 billion.

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