Reaffirming its bullishness on post-war rebound in the economy and especially in the industrial sector, Vallibel One Ltd., (VOL) yesterday diversified into the garment export sector by acquiring 50% stake in Orit Apparel Ltd., for US$ 3.5 million.
Orit Apparel Lanka, a Board of Investment company specialises in manufacture and export apparel. With a turnover in excess of US$ 80 million and over 6,000 employees spread across eight plants producing 822,000 pieces per month. Orit also positions itself as Sri Lanka’s number one denim specialist manufacturer.
The venture was a joint venture between industrialist Channa Palansuriya and American investor who held 70% stake. Whilst VOL took 50% stake, the balance 20% stake was bought by Palansuriya who now increases his holding to 50%. The US investor sold the 70% stake for $ 7.3 million. The acquisition of Orit and diversification into apparel comes hot on the heels of VOL acquiring 51% stake in Delmege Forsyth Group and the remainder by a connected consortium for Rs. 3 billion.
VOL Executive Deputy Chairman Nimal Perera told the Daily FT last night that the export apparel sector was picked as it has good potential especially the segment in which Orit serves. “Orit is a good venture and the business which it is in is attractive, hence we decided to invest in this opportunity,” Nimal added. The deal had been under negotiation for over a month.
VOL is the first holding company of select investments of business leader Dhammika Perera. It currently has 51% stake each in Royal Ceramics and LB Finance and 15% stake in Sampath Bank apart from 51% stake in Delmege Forysth Group. Dhammika also controls diversified blue chip Hayleys with a 31% stake and the Group has Hayleys MGT focusing on knitted fabric. Going forward some synergies can be expected between Orit and Hayleys MGT or between VOL and Hayleys as well.
Early this week apparel industry leader Barndix CEO and Textured Jersey Chairman Ashroff Omar expressed confidence over the prospects of the industry despite loss of GSP+.
His remark was in connection with Textured Jersey’s own future prospects as the Company’s Rs. 1.2 billion Initial Public Offering (IPO) is now on for subscription.
Omar said that funds raised from the IPO Textured Jersey was to tap into the “tremendous” growth expected for Sri Lanka apparel and insisted that the country’s target of US$ 5 billion revenue by 2015 will be reached earlier if current growth rates are preserved.
“Knit products are the fastest growing segment of the Sri Lankan apparel export market, which is growing strongly even after the end of the GSP+ concessions in August 2010,” Omar added.
He pointed out that the industry has proved to be resilient even beyond the last decade and has managed to grow despite many challenges. In fact the industry is expected to grow at 50% for the next five years.
Textured Jersey in 2010/11 financial year recorded revenue of US$83.2 million and a net profit of US$ 6.1 million. This is a 15% and 23% year on year increase respectively.
Orit said that its core strength lies in single minded dedication to the art of denim and a knowledge bank of organsied design teams that are engaged in developing new washing techniques and quality finishes.