Hela Apparel bets big on Egypt operations to boost group revenue

From left: Deshan Pushparajah of CAL Investments Bank, Hela Apparel Holdings Limited Group CFO Moiz Rehmanjee, Hela Apparel Holdings Limited Chairman A.R. Rasiah, Hela Apparel Holdings Limited Group CEO Dilanka Jinadasa and CT CLSA Holdings Group COO and Head of Investment Banking Zakir Mohamedally
Pic by Pradeep Pathirana

By Nishel Fernando
Sri Lanka-headquartered Hela Apparel Holdings Limited, the holding company of Hela Clothing Group, eyes to benefit from Egypt’s strategic location, as it prepares to officially commence shipments from this month from its latest manufacturing facility located in Alexandria, Egypt.

Hela Apparel yesterday held a special investor forum in Colombo, ahead of its Rs.4 billion IPO on the Colombo Stock Exchange (CSE), which is set to become the largest IPO in nominal terms for over a decade.

“We just received our tax card for Egypt operations and we have the export and import licences to be received next week. Although we have been shipping, it was under the previous owner. So, we will be able to officially record revenues from Egypt operations from this month onwards. Moving forward, we expect the largest growth to come from Egypt outside of Sri Lanka,” Hela Apparel Holdings Group CEO Dilanka Jinadasa told Mirror Business on the sidelines of the investor conference.

Hela Apparel recently acquired a manufacturing facility in Egypt on a long-term lease basis, eyeing to offer an additional value proposition to its customers. In particular, the company plans to take the advantage of Egypt’s near-shoring value proposition with shipping times running up to as little as three days to Europe and 12 days to the United States. Jinadasa said Hela Apparel has already seen buying interest from several upmarket brands from its Egypt operations. “Within less than a month into operations, Victoria Secret has come to our doorsteps and Nike is another potential customer,” he said.

Currently the manufacturing plant employs 1400 workers while the full capacity can go up to 4000 employees.
Jinadasa expects Egyptian operations to account for 10 percent of the group’s revenue by the end of the year.
In addition to its strategic location, Egypt also benefits from indefinite duty-free access to the US, EU and UK markets and has a well-developed textile supply chain.

Given the competitive advantage Egypt and North Africa offer, Jinadasa noted that other major apparel manufacturers are likely to follow Hela Apparel’s path over the next year.

Hela has 11 directly operated manufacturing facilities located across three countries—seven in Sri Lanka, two in Ethiopia and two in Kenya. Those are supplemented by partnered capacity in Tanzania and Mozambique, where the group is in the process of establishing long-term production agreements with third party manufacturers. 
Moving forward, Jinadasa noted that Hela Apparel might look into expanding to Central America, given its close proximity to the United States and with the growing focus on near-shoring and on-shoring.

In FY21, the group generated 56 percent of its revenue from US-based customers, with a further 38 percent from European customers and the remaining 6 percent from other regions, primarily Asia.
Hela Apparel will be offering 267,108,998 ordinary voting shares, accounting for a 20.5 percent stake in the company to the public, at a price of Rs.15.00 per share, through its IPO, which is scheduled to open on the 12th of this month. 

The IPO is jointly managed by CT CSLA and CAL.
As per the basis of allotment agreed by the company, with the consultations of the CSE, 15.50 percent, 10 percent, 7.5 percent and 67 percent of the issuance would be allotted to retail individual investors, unit trust investors, group employees and directors and non-retail investors, respectively, upon full subscription.

However, the board of directors reserves the right to preferentially allot up to 75 percent of the shares available for allotment under the non-retail investor category to identified investors, who apply through this category, under the IPO.

Hela Group caters to some of the world’s leading apparel brands, including luxury and lifestyle brands such as Calvin Klein, Tommy Hilfiger, Michael Kors and European supermarkets, including Tesco and ASDA.
The company, with revenues generated exclusively in US dollars, is forecasting revenue of US $ 270 million for the current financial year.