RIL Property announces Rs.800mn rights issue to settle bank borrowings

RIL Property PLC this week announced plans to issue fresh shares to its existing shareholders to raise money in a bid to settle part of its bank borrowings that weigh on group profits.  

In a stock exchange filing, the property developer, which has interests in food and automobiles, said it will issue 200 million ordinary voting shares in the proportion of one new ordinary share for every three shares held at an issue price of Rs.8.00.  

At Monday’s market close, RIL Property’s share ended 60 cents higher at Rs.7.80. This makes the right issue price higher than the trading price of the stock. 

Theoretically, for a right issue to become attractive the issue price must be lower than the current trading price of the stock but in RIL Property’s case, since the majority stake is held by a family, this notion is less relevant. 

As of December 31, 2017, the Yaseen family collectively held 77.6 percent of RIL Property.  
The firm’s stated capital currently stands at Rs.5.76 billion, represented by 600 million shares and subsequent to the right issue, the share capital will rise to Rs.6.56 billion.

In November last year, RIL Property acquired 51 percent stake in United Motors Lanka PLC (UML), which holds local agency for Mitsubishi vehicles and several other European and Chinese automotive brands, for Rs.4.03 billion. 

The all-cash deal was debt-funded as the group made fresh borrowings to the tune of Rs.4.14 billion.
Post acquisition, RIL group saw its gearing level rising as the total borrowings rose to Rs.7.17 billion, which included UML’s debt.  

“The UML acquisition increased finance cost by Rs.45 million in the third quarter and the financing impact on the financials is receiving the close attention of the board,” RIL Group Chairman Sunil Wijesinha said in his December quarter (3Q18) earnings release. 

In April 2017, RIL Property group listed its shares in the Main Board of the Colombo Stock exchange. 
The firm raised Rs.960 million through its Initial Public Offering, issuing 120 million shares at Rs.8.0 a share. 

An estimated Rs.694.1 million from the IPO proceeds is to be spent to refurbish the company’s Readywear building bordering Braybrook Place, which is expecting completion by June 2019. 
The balance Rs.265.9 million is being spent on FoodBuzz Private Limited, the group’s 100 percent subsidiary, which operates as the franchisee for the Singapore-based BreadTalk group. 

During 3Q18, FoodBuzz opened its ninth BreadTalk outlet in Ratmalana and the group aims to bring its total outlets up to 16 by 2021. 

Meanwhile, for the 3Q18, RIL Property group reported earnings of Rs.4.41 a share or Rs. 2.56 billion compared to Rs.14 cents a share or Rs.65.1 million in earnings in the same quarter, last year, due to over Rs.1 billion in goodwill having resulted from the UML acquisition and Rs.1.5 billion UML profits recognized for the period.

The company said FoodBuzz Private Limited, which was making losses, broke even during 3Q18.