Hela Apparel Holdings Chairman A.R. Rasiah (centre) speaks at the media launch of the upcoming IPO. Also pictured here are CAL Investment Bank Deshan Pushparajah, Hela Apparel Holdings Group CFO Moiz Rehmanjee, Group CEO Dilanka Jinadasa, and CT CLSA Holdings Group COO/Investment Banking Head Zakir Mohamedally – Pic by Lasantha Kumara
- Offers 20.5% stake via IPO to raise Rs. 4 b to fund next growth wave
By Darshana Abayasingha
Leading Sri Lankan apparel manufacturer, Hela, will open its Initial Public Offering (IPO) on 12 January divesting a 20.5% stake of the company to raise Rs. 4 billion. The company that claims to have spearheaded Africa’s apparel revolution, will spend Rs. 2 billion on balance sheet restructuring to settle legacy loans in Sri Lanka, and a further Rs. 1 billion on vertical integration and supply chain security with the purchase of a fabric mill in Egypt. The remainder would be invested in manufacturing automation and an ERP system for enhanced control.
Hela will become Sri Lanka’s first apparel manufacturer with a global footprint to launch an IPO. Listing 267 million shares at Rs. 15 each, the Company states Earnings Per Share are forecasted to grow 145% through 2020 to 2025, whilst the valuation upside of the offer is 28.4%. With revenue recording a CAGR of 15.6%, Hela estimates revenues of over $ 280 million at the end of the current financial year. The company has a 33% dividend policy, and with earnings entirely in US Dollars, “any further weakness in the Sri Lankan rupee will show in your dividend as well”.
With a manufacturing presence in six countries, currently one of every five garments coming out of Kenya and Ethiopia come from a Hela facility. Group CEO Dilanka Jinadasa says Hela chose to go to Africa breaking the trend of flocking to Bangladesh and Vietnam, and have accordingly reaped the benefits of being one of the first movers to what was once the ‘dark continent’.
“We went to Kenya first in 2015 and acquired a factory of about 200 people and now we have over 2,000 people working there, and it is the same in Ethiopia. Africa is a great place for global brands, and to establish a global footprint as they have great free trade access to Europe and the US. The next stage of our expansion is coming from North Africa; hence, our focus on is Egypt as there is good cotton, in addition to access and shipping to Europe and the US due to proximity to the Suez Canal. This gives us shorter lead times, which many others don’t have. Sri Lanka will remain the hub for innovation,” Jinadasa said.
“We have turned around businesses almost with a private equity mentality. We turned around our factory in Ethiopia in 13 months, and we hope to do the same with our Egyptian acquisition in six months,” he added.
Hela Clothing employs over 18,000 persons across its manufacturing and operational bases, adding 4,000 staff to its cadre since the onset of the pandemic. The company serves several leading luxury and lifestyle clothing brands in addition to a couple of essential retail chains. It has spread its presence and focus across different retail spaces giving it wider flexibility and control over market changes.
Speaking during a media briefing to announce the launch of the IPO, Hela Clothing Chairman A.R. Rasiah said the company has gradually expanded to not only export garments but also to export Sri Lanka’s managerial skills.
He noted that Hela was the first industry player to offer share options to its staff, and despite the challenges posed by the pandemic to global supply chains the company is functioning with “a clearly defined plan.”