Hela Apparel Holdings announces IPO to raise Rs.4 bn

• To offer 20.5% stake or 267.1mn shares at Rs.15 per piece 
• All existing shareholders will be locked in for a minimum period of six months
• First-ever IPO by a Lankan apparel manufacturer with a global footprint
• Largest public issue by value in over a decade
• To use half of IPO proceeds to settle debt and Rs.1bn to set up a fabric mill and balance to leverage technology 

The Colombo Stock Exchange has formally approved the initial public offering (IPO) of Hela Apparel Holdings Limited, the holding company of Hela Clothing Group, with the offer set to open on Wednesday, January 
12, 2022. 

This highly anticipated IPO, by one of Sri Lanka’s leading social-capital-focused apparel supply chain solution providers, will see 267,108,998 new ordinary voting shares offered to the public at a per-share price of Rs.15.00.

The issue, which is being jointly managed by CT CLSA and CAL, seeks to raise Rs.4 billion in equity from the public through the offering of a 20.5 percent stake in the company, resulting in a projected market capitalisation of Rs.19.5 billion. 

All existing shareholders will be locked in for a minimum period of six months. Hela’s IPO will mark the first-ever IPO by a Sri Lankan apparel manufacturer with a global footprint and the largest public issue by value in over a decade. 

Discussing the IPO, Hela Group CEO Dilanka Jinadasa said, “Over our three decades in the industry, we have evolved into an end-to-end apparel supply chain solution provider with a strong global footprint, particularly in Africa. We work with leading international brands and have built strong relationships with these customers over the years by leveraging our attractive manufacturing footprint across five countries and customer-orientated business model. As a social-capital-focused company, we were also among the few apparel businesses in Sri Lanka, which identified early on that our edge lies in responsible manufacturing and sustainability-focused solutions. We are very pleased to present our IPO, as it allows us to fuel the next stage of our strategy and more importantly allows us to share this journey with a wider group of stakeholders.”

At the per share price of Rs.15.00, the implied price-to-earnings ratio (PER) based on forecasted earnings for the current financial year (FY22) stands at 10.5X, compared with the 12.9X market-cap-weighted average PER of local peers. 

Revenues are exclusively generated in US dollars, with a revenue forecast of US $ 270 million for the current financial year. The company employs over 18,000 people globally and has an existing employee stock ownership plan (ESOP) in place, with management accounting for a significant stake in the company. 

Explaining how the capital generated by the IPO will be deployed, Jinadasa said, “We are embarking on an ambitious plan for strategic and profitable growth, with a focus on leveraging technology and further strengthening our supply chain. Thus, we intend to allocate approximately Rs.1 billion towards an investment in a fabric mill, Rs.0.6 billion towards beefing up our core digital systems through the implementation of a new SAP ERP system and Rs.2 billion towards strengthening our balance sheet by settling the existing debt, in order to support future expansion. In addition to this, we also plan to allocate Rs.0.4 billion towards automation-related capital expenditure to improve productivity and efficiency.”