Damro sitting on 22,000 ha: Caters to Indian demand
Furniture manufacturer Damro Group in a bid to cater to mounting demand for its furniture products bought Agalawatte and Pussellawa Plantations early this week and are now sitting on 22,000 hectares of a land base.
LOLC-controlled Browns Power Holdings Ltd on Monday exited from the troubled Agalawatte Plantations, which owes a staggering Rs. 2.5 billion with interest to 12 financial institutions. The Colombo Stock Exchange was informed that Browns sold its entire 61 per cent stake to D.R. Investment (Pvt) Ltd at Rs. 18 per share, a slight loss compared to its buying price many months ago from the Mackwoods Group. They sold it for Rs. 275 million, incurring a Rs. 30 million loss.
Damro officials told the Business Times that they are working on what the liabilities are at Agalawatte and will ‘settle’ them as soon as possible. “We were aware of the debts at Agalawatte, but we see value in the company as it will complement our business. Also we will replant tea, rubber and palm oil almost immediately at the plantations,” an official said.
The deal with Mackwoods was clouded in uncertainty after a family squabble at Mackwoods led to an initial suspension of the transaction by the Securities and Exchange Commission, and later allowed while the Sri Lanka Accounting Standards Monitoring and Board wanted the then owners – Browns to carry out an audit.
It was after this audit that Browns saw the actual position of Agalawatte. “In these accounts we saw so many malpractices with a Rs. 1.2 billion hole and decided to sell it. The negotiations went on for only one week and they were successful,” a Browns official added.
Browns Power also sold its 45 per cent stake in FLMC (Free Lankan Management Company) Plantations, which was earlier controlled by the Aloysius family, for Rs. 4.7 billion, also to Damro-connected companies. The Aloysius family including Arjun Aloysius owns a string of firms including Perpetual Treasuries and connected companies which has been implicated in a 2015 Treasury bond scam.
The exit from FLMC Plantations was because LOLC wanted to exit plantations, a sector it was earlier keen to enter but then faced the problem at Agalawatte, officials said.
Damro was earlier vying for state owned Hapugaspitiya, Millawana and Nalanda Estates under Elkaduwa Plantations Ltd (EPL) for large-scale cultivations and had sent a proposal pertaining to this to the ‘Plantations Committee’ under the Public Enterprise Development Ministry on a Public Private Partnership (PPP) project. A Damro official said that export demand also looks to growing which is the reason that the group has initiated to set up a Particle Board Manufacturing Complex in Urapola, Gampaha and two diverse Furniture Manufacturing Complexes focused on local and export markets at Thorayaya, Kurunegala District to accommodate the demand.
Damro uses rubber wood particles as the main raw material for manufacturing panel furniture. The official said that as they use wood as main raw material for furniture, the group had expected to commence a large-scale Tabebuia cultivation project with the objectives of sourcing sustained supplies of wood particles while providing a significant contribution to the environment with the earlier project. But the state wasn’t too keen to give them the specific plantations they had requested.
The total land selected in estates was around 1,370 hectares and this investment proposal was presented with the objective of cultivating Tabebuia trees in 250 hectares in these estates as bare land cultivations and intercropping Tabebuia in 280 hectares of coconut lands at an estimated capital infusion of Rs. 1200 million in first five years to tie up in the entire project.
But now they’ll concentrate on rubber, they added.