Industrial Asphalts to raise Rs. 150 m via Rights

Industrial Asphalts (Ceylon) PLC is to raise Rs. 150 million via a Right Issue to expand its business. 

The Board of Directors has resolved to issue almost 750 million shares at 20 cents each, which incidentally was the last traded price. Net asset value per share is Rs. 825.32 as at 31 December 2019. The company’s current stated capital is Rs. 6.6 million.

Major shareholders of Industrial Asphalts (Ceylon) (IAC) include G. Ramanan (67%) and Dr. T. Senthilverl (6.5%) whilst the company has 504 shareholders and the public float is 32.6%.

The company said the proceeds of the Rights Issue are to finance the working capital requirements to support the expansion of core activities. 

Industrial Asphalts is an investment holding company and originally specialised in manufacture and distribution of specialised bituminous products, distribution of a range of surface coatings and marketing of industrial chemicals.

The total Revenue from its operations for the third quarter of FY20 reached Rs. 118 million up by 80% from a year earlier. Profit from operating activities was Rs. 3.4 million, down from Rs. 6.6 million whilst a negative bottom line of Rs. 0.5 million was recorded as against a profit of Rs. 2.8 million. In the nine months, revenue was Rs. 391 million up by 211% and profit from operating activities was Rs. 18.5 million, up by 21%. Pre-tax profit rose by 62% to Rs. 6.8 million and after tax profit up 38% to Rs. 5.8 million. In the interim results for third quarter the company said the net profitability dipped marginally into negative territory primarily due to inclement weather experienced as such the off take was not robust affecting price points. 

IAC’s operations are a combination of its primary asset, the land at Peliyagoda and its traditional business lines. The traditional business lines were completely revamped after the initial strategy followed in 2014-2016 which did not yield the targeted results as the underlying economic environment changed from one of progressive economic policies to one of regressive economic policies resulting in the requirement to change gears and retool to a more conservative approach to business activity. 

In its strategic review, the company stumbled upon a line of business which it had long discontinued, this was resurrected and deployed under a new leadership. 

“We have experienced immediate results. Starting from the fourth quarter of FY2019 we are now experiencing exponential growth. We have introduced new life to our traditional business life, with methodologies to handle ancient risk factors we have been able to turn these businesses into high growth segments replicating in essence a high growth venture,” the company said. 

The trademark registration of IAC’s brands is at the tail end of the process, several trademark registrations passing the penultimate milestone in the registration process. With the key brands under the IAC’s umbrella being registered, the company said it is in a position to take necessary legal action to reign in the ‘duplicates’ market, where key brands are being actively used by fraudulent ventures. 

“The benefits of these actions would start accruing to the company from Q4 FY2020 onwards. We have initiated the process of obtaining the requisite Intellectual Property rights for our product formulae,” the company said.

It also said export initiatives are now starting to show good traction, and the company expects the level of activities to take up increasingly larger portions of the quarterly revenue.