JAT Holdings plans Rs.2.2 bn IPO offering 16% stake in company

• Prices at Rs.27 a share, 17% discount on per share value of Rs.32.45
• To use IPO proceeds to set up manufacturing facilities in Bangladesh, Africa
• CAL and NDBIB act as financial advisors and managers to the offer

JAT Holdings, Sri Lanka’s market leader in the wood coatings sphere is gearing to raise up to Rs.2.2 billion offering 16.24 percent stake in the company through an initial public offering (IPO) on the Colombo Stock Exchange (CSE).
Accordingly, the company plans to issue 82.9 million ordinary voting shares priced at Rs.27 a share via the proposed IPO, which has a 17 percent discount to the value per share of Rs. 32.45 derived from a combination of discounted cash flow (DCF) and forward price-earnings ratio (PER) valuation methods.

Speaking to Mirror Business, JAT Holdings Founder and Managing Director Aelian Gunawardena confirmed that the firm has already submitted the application for the listing with CSE and is currently awaiting approval.

After securing CSE approval for the proposed listing, he noted that the IPO date would be announced based on market conditions.  Once CSE approval is granted, the entity will have to decide the date of the proposed IPO issuance within a six-month period.

CAL and NDB Investment Bank have been appointed as financial advisors and managers to the offer. 
Incorporated in 1993, JAT Holdings (Pvt) Limited, is considered to have a commanding market share in the wood coatings sphere in the country. Further, it is also a dominant player in decorative painting and interior living space market segments.

JAT is also the exclusive agent for several world-leading brands in Sri Lanka including Herman Miller office furniture, SEA kitchen solutions, Lifewood flooring and Armstrong ceilings among others. 

In particular, it has exclusive rights to manufacture and distribute one of the world’s leading wood coating brands, Sayerlack, across Sri Lanka, India, Bangladesh, Maldives, Pakistan and certain African countries.

In the 2018/2019 financial year, JAT reported Rs. 880.97 million profit on Rs.6.54 billion revenue with Year-on-Year growth rates of 20 percent and 39 percent respectively. In the year, exports accounted for 25 percent of its revenue, mainly from Bangladesh where it maintained market leadership in wood coating segment over the past decade. In addition, it also maintains a leading market share in Maldives. 

Most recently, JAT ventured into Ghana in the West African region after securing distributorship for the African continent by the well-known United States based Sherwin Williams, known for its paint line. With the proceeds of the proposed IPO, JAT plans to allocate Rs.515 million to set up a manufacturing plant in Bangladesh, and Rs.302 million will be set aside to establish a manufacturing plant and to expand its reach in the African continent.  The firm believes that Bangladesh would be the key market for it to become a regional leader, leveraging on its track record of operating in that country. In addition, the firm also has pinned high hopes on the African market, where it plans to commence manufacturing. The company intends to set up manufacturing facilities in Bangladesh and Africa in FY22 and FY23 respectively. In addition, with Rs.433 million IPO funds, JAT plans to enhance the existing R&D facility to a fully-fledged state-of-the-art facility while allocating Rs. 257 million to expand the ‘WHITE by JAT’ premium white emulsion paints marketing and development initiative.

Beyond its core wood coating and decorative products, JAT also envisages positioning itself as the top player in the broader interior and living space market. Last September, ICRA Lanka Limited reaffirmed the issuer rating of A+ with Stable outlook for JAT Holdings (Pvt) Ltd. Gunawardene directly holds 71.37 percent stake in JAT Holdings followed by J Chem Coatings (Pvt) Ltd., which has 8.76 percent stake and Falcon Trading (Pvt) Ltd, a subsidiary of Akbar Brothers, with 5.92 percent stake. In addition, Emerald Sri Lanka Fund 1 Limited, a private equity fund managed by NDB Zephyr Partners Limited (NDBZ) has 5.92 percent in the company.  The government granted 50 percent tax concession for the 2021/2022 financial year and further tax concessions up to three years to incentivize more firms to get listed on the CSE before the end of this year. So far, the CSE has attracted several firms in different sectors, particularly family-owned businesses. (NF)