Post-war bullish Free Lanka Capital’s Rs. 1.5 b IPO to fund growth sectors

Reflecting strong bullishness over prospects in post-war Sri Lanka, the Free Lanka Capital Holdings Ltd., (FLCH) has made key progress to invest Rs. 1.5 billion to be mobilised via its now open for subscription IPO on several growth sectors.

Currently having strong interests in the plantation and mini hydro power sectors FLCH will be investing Rs. 600 million to further expand the latter apart from channelling an equal amount for its diversification into commercial property development in Borella and Rs. 250 million initial investment for its foray into the tourism sector.

The directors of FLCH yesterday expressed optimism of strong earnings growth in these sectors as a result of on-going and planned expansion in existing core sectors and diversification planned into new areas. The Company is issuing a 22% stake or 300 million ordinary shares at Rs. 5 each via its Initial Public Offering (IPO) official opening of which is on 17 March. Inviting the public to invest with a minimum of 2,000 shares (at a cost of Rs. 10,000), the Company will be listed on the Diri Savi Board. Both retail (up to 10,000 shares) and non retail investors will be allotted 50% each of the offered amount.

FLCH, which is a joint venture between Browns Investments Ltd and Perpetual Holdings Ltd., through its subsidiaries owns Maturata and Pussellawa plantations and manages over 23,000 hectares of tea and rubber comprising of a total of 43 estates. Tea account for a revenue extent of over 7,500 hectares and rubber’s share is over 3,200 hectares of land.

The Company said the rubber segment has successfully generated the highest yield among plantation companies and due to the immense future potential of this sector further expansion is planned. Concurrently the company has also ventured into timber planting for commercial purposes with an initial base of over 1.2 million plants.

The FLCH Group also has a growing footprint in mini hydro power via its Hydro Power Free Lanka Plc (HPFL). It currently generates 3.2 MW of power through two units and is in the process of expanding with four units with a total capacity of 5.37MW bringing the total to be connected to the national grid to 8.75MW by April 2012.

Using proceeds from the IPO the Group will further expand by developing 7 more mini hydro power plants boosting generation by another 7.45 MW. By end 2013, the Group envisages a total of 16.02 MW of hydro power connected to the national grid.

It is also venturing into the leisure sector with two boutique hotels collectively having around 90 star class rooms in scenic locations of Pussellawa Plantations situated in Giragama in Kandy and Ayr in Padukka. Its real estate foray would be by setting up a commercial property complex in Borella comprising 80,000 square feet of rentable space.

Excluding HPFL, the FLCH Group in 2009/10 financial year had a turnover of Rs. 4.8 billion and a pre-tax profit of Rs. 341 million whilst profit attributable to equity holders was Rs. 80.1 million, up from Rs. 2.2 million a year earlier. Group assets amounted to Rs. 13 billion, up from Rs. 11.4 billion in 2008/9.

In the nine months of the current 2010/11 financial year Group turnover (inclusive of HPFL) was Rs. 4.73 billion, up by 32% over the corresponding period of previous financial year. Pre-tax profit was Rs. 975 million whilst post-tax profit amounted to Rs. 921.3 million, as against Rs. 137.4 million a year earlier. Net profit attributable to equity holders was Rs. 390.5 million in the first nine months of 2010/11 as against Rs. 44.6 million a year earlier. Group assets had increased to Rs. 14.3 billion as at 31 December, 2010.

Free Lanka Capital Holdings Ltd’s Board of Directors comprises K. Aloysius (Chairman), Godfrey Aloysius (Managing Director and CEO), Geoffrey Aloysius, Ishara Nanayakkara, Ajith Devasurendra, Manik de Mel, Kamantha Amarasekera, Murali Prakash, Rimoe Saldin, Indrajith Fernando and Daham Wimalasena.