Damro enters plantations with Rs. 5 b deals on Pussellawa and Agalawatte

• Browns exits loss-making Agalawatte acquired from Mackwoods in July last year
• Reduces stake in managing firm of Pussellawa from 55% to 10% at hefty profit

Popular furniture brand and South Asia’s largest retailer Damro is entering the plantation industry with strategic investments in Agalawatte and the managing company of Pussellawa. 

In two separate yet connected deals yesterday, the Damro group of companies acquired 45.1% stake in Pussellawa Plantations Plc’s managing agents FLMC Plantations Ltd. for Rs. 4.7 billion and a controlling 61.1% stake in Agalawatte Plantations Plc for Rs. 275 million.

Through the deals, the Browns Group reduced its exposure to the plantation sector. 

Browns Capital Plc (formerly known as FLC Holdings Plc) divested 4.5 million shares in FLMC Plantations Ltd. at Rs. 1,040 per share. The buyers were Piyestra Furniture Ltd. (2.588 million shares for Rs. 2.69 billion), D.R. Furniture Manufacturing Ltd. (0.96 million shares for Rs. 1 billion) and D.R.M. Manufacturing Ltd. (0.96 million shares for Rs. 1 billion).

Browns will continue to hold 10% stake in FLMC Plantations giving Damro control in the managing company. The balance 45% stake is held by a foreign shareholder. The carrying value of Brown’s 55% stake in FLMC Plantations in FY2016 was Rs. 600 million.

FLMC Plantations is Browns Capital’s management and investment company for plantations.

Coming under Browns Capital Plc, Pussellawa Plantations Ltd. has a mix of tea and rubber plantations, with 2,492 hectares of tea and 3,371 hectares of rubber.  Spanning over 11,000 hectares, the 13 estates are geographically located in the Colombo and Ratnapura districts and 11 estates in the Pussellawa and Kandy areas. 

Browns Capital also owns Maturata Plantations and has interests in the power, leisure and real estate sectors through its subsidiaries, associates and sub-subsidiary companies.

Separately, Browns Power Holdings Ltd., a fully-owned subsidiary of Browns Capital Plc, sold 15.27 million shares in Agalawatte Plantations Plc (APL) to D.R. Investment Ltd. at Rs. 18 per share.

Owning tea, rubber and oil palm assets with nearly 11,000 hectares, APL is loss-making and previously came under the Mackwoods Group. Its net asset per share as of August 2016 was Rs. 10, down from Rs. 20.78 a year earlier. Browns acquired the stake at Rs. 20 per share in July last year.

As at August 2016, the retained loss at APL was Rs. 964 million. The loss from continuing operations in the six months ended June 2016 was Rs. 195 million, though down from the Rs. 376 million of a year ago.

The Damro Group styles itself as South Asia’s largest furniture manufacturer and Sri Lanka’s number one furniture retail network. In recent years it has expanded its product offering to cover consumer electronics and durables. Since Damro was established in 1986 it has achieved rapid success and has expanded to over 200 showrooms including over 60 in India. It employs nearly 10,000 people.

Analysts said its entry into the plantation sector was linked to enjoying the readily available raw material of timber for its booming furniture range as well as to harness its wider prospects through better management of plantations’ core products.