• Company set to offer 20% stake via IPO; plans immediate expansion into Egypt 
• Expected to shortly submit its IPO application to the CSE for approval
• Capital Alliance and CT CLSA to function as joint managers to the issue
• Current shareholders of the company consist of a consortium of local and international giants in the apparel sector

One of the fastest growing apparel manufacturers in Africa, Sri Lanka-headquartered Hela Apparel Holdings plans to raise up to Rs.4 billion (US$ 20 million) by offering 20 percent stake in the company through an initial public offering (IPO) on the Colombo Stock Exchange (CSE) to fund growth initiatives in Sri Lanka and Africa, including its immediate expansion into Egypt. 

Hela caters to a elite clientele including leading global brands such as Tommy Hilfiger, Calvin Klein, Michael Kors and VF Corp with its 10 factories located across Sri Lanka, Kenya and Ethiopia, as well as partnered capacity in Tanzania and Egypt, which are supported through its design centers in Sri Lanka, the US and UK.

With its early entry into the African continent, the company has already established itself as the leader in apparel manufacturing in Kenya and Ethiopia accounting for 20 percent of apparel exports in the two nations.

Hela is expected to shortly submit its IPO application to the CSE for approval and has selected Capital Alliance Partners Limited (CAL) and CT CLSA Capital (Pvt) Ltd as joint managers for the listing process. 

According to Discounted Cash Flows valuation, the IPO is expected to offer an immediate upside of 20.6 percent to an IPO investor on the post-money valuation. 

Further, the dividend yield (post-IPO) is expected to be between 2.9 percent - 10.3 percent over the next five years.

For 2022 Financial Year, the company’s revenue is projected to reach Rs.48.8 billion from Rs.34.2 billion revenue reported in the previous financial year, while its earnings are projected to double to Rs. 8.2 billion in the FY22.
The company expects to generate 52 percent of its income from Sri Lanka while increasing income generation in Kenya and Ethiopia to 38 percent and 10 percent respectively.

The IPO proceedings are expected to be utilised to fund key growth initiatives in Sri Lanka and to strengthen the company’s balance sheet to support further expansion in Africa.  

The company has plans to use Rs.2 billion for balance sheet restructuring from IPO proceedings followed by investments into verticality, investments in SAP and digital initiatives as well as investments into automation initiatives. 

In addition, it has announced Rs.680 million capital expenditures to be funded via debt financing into Africa expansions.

Hela has chosen Egypt as its next expansion, which has a US$ 1 billion industry that has the potential to rival Turkey (US$ 25 billion industry). 

The Egypt operation is expected to significantly reduce lead times for US and EU customers and improve the value proposition by localising the supply chain for African manufacturing while providing the customer indefinite duty-free manufacturing. 

With a planned output capacity of 1 million units per month, Hela plans to enter into operations in Egypt in the first quarter of 2022 employing 1500 employees. It aims to be the largest intimates exporter in the country by 2024 with plans to reach breakeven point within six months of commencement of operations.

The current ownership of the company consists of a consortium of local and international giants in the apparel sector led by Lesing Hela, a special purpose vehicle formed to benefit Tom Singh Family, a UK fashion pioneer and founder of high-street fashion chain ‘New Look’.

The other top shareholders include Tars Investment Lanka represented by a former Chairman of Sampath Bank, Channa Palansuriya, followed by shareholding of the Company CEO and Executive Director, Dilanka Jinadasa. He was formerly the Managing Director of Foundation Garments and is credited with transforming it into one of Sri Lanka’s most progressive apparel organisations prior to its acquisition by Hela in 2016.