Several top blue chips including John Keells Holdings PLC, Ceylon Investments PLC and Softlogic Holdings Limited, bought into Expolanka Holdings Ltd. in September last year paying a price of Rs.6 per share offered at the company’s IPO which opens on May 12 to the public at Rs.14 per share.
However, analysts said that these were not new shares, as in the case of 172 million shares to be issued at the Expolanka IPO to raise slightly over Rs.2.4 billion for the company.
"The private placement was a sell down (by the directors who sold some of their own shares) and not an issue of new shares by the company," one well informed analyst explained. "The pricing for the private sale was a decision of the sellers and does not affect the valuation of the company."
He said that Expolanka restructured its operations prior to the forthcoming IPO to enhance shareholder value by divesting some loss making businesses within the group.
These loss-makers were purchased by members of the Kassim family which controls Expolanka Holdings and they used the proceeds of the sell down of their Expolanka shares to purchase the loss making companies from the parent. Thus much of the sales proceeds of their Expolanka shares went back to Expolanka and help restructure its balance sheet.
At a meeting last week between Expolanka’s directors and management, the investing community and brokers, Mr. Khalil Masood, a former Chairman of Pakistan’s SEC who lives here and runs the brokerage, SKM Lanka of which he owns 25%, asked whether the big purchasers at the six-rupee price would give a commitment that they would hold the shares for at least a three-year period.
"That is a tall order" replied Mr. Osman Kassim, Chairman of Expolanka who indicated that it was not possible for them to give such an undertaking on behalf of other shareholders.
However, Mr. Krishan Balendra, President of John Keells Capital, lead managers and financial advisors to the issue said that it was likely that the John Keells group would participate in the IPO.
Mr. Ashok Pathirage, Chairman of Softlogic Holdings, said that his group was bullish about Sri Lanka and about Expolanka and said that they too would participate in the IPO.
Analysts said that it was likely that some other big names like Carsons would also be participating in the issue.
The buyers at the six-rupee price in September 2010 included JKH (83.3 million shares), Ceylon Investments (of the Carsons Group) (41.6 million), Lanka Strategic Investments (16.7 million) Softlogic (16.5 million), Falcon Trading (8.3 million), Times Garments (8.3 million) and some other clients of John Keells who got allotments.
In September, five directors of Expolanka, Messrs. Osman Kassim, Sattar Kassim, Shafik Kassim, Farook Kassim and Hanif Yousoof (CEO/Director) of the group sold down 61.3 million shares each of their holdings at the Rs.6 price.
However, all of them own approximately 283.8 million shares each of the company prior to the IPO.
Well informed sources said that at the time the Rs.6 sell down price was determined, the only final figures available were the results of the company’s performance in the financial year ended March 31, 2010 when an after-tax profit of Rs.591 million was earned on revenue of Rs.23.7 billion.
But in the nine months ended December 31, 2010 a consolidated pre-tax profit of Rs.1.9 billion had been posted following the divesting of the loss making companies.
"The proceeds of the private sell down were required for the restructuring. The company has since been restructured and has independent directors and some large institutional shareholders who have raised its profile," an analyst said.
He said that the IPO pricing (of Rs.14) is based on market multiples, historic performance and forecasts.
"For the IPO pricing, the company had the benefit of the actual nine months performance to December 31, 2010 which is significantly better than what was achieved for the full year to March 31, 2010," he said.
Analysts also made the point that Expolanka, with a portfolio of 46 companies within the group is doing business in a number of countries in the region including Sri Lanka, India, Pakistan, Bangladesh, Vietnam, Indonesia, Dubai (UAE), Kenya, Mauritius, Madagascar and South Africa.
"This would mean that any investor in Expolanka will have exposure to the economies of several countries other than Sri Lanka," the analyst said.
Most of those present at last week’s meeting when the company showcased itself were confident that the issue would be over-subscribed and would close on the opening day.
The group’s biggest business is transportation including air freight, sea freight, combined sea and air, freight consolidation etc. It is also into a variety of other businesses including tea, transportation, waste paper, bio extracts, IT, BPO and a host of others.
The Expolanka board has three Independent Directors outside the Kassim family – Dr. S. Selliah, Harsha Amarasekera and Sanjay Kulatunga.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=24285
Home
would enable you to enjoy an array of other services such as Member Rankings, User Groups, Own Posts & Profile, Exclusive Research, Live Chat Box etc.. 
