Financial Times

Sierra Cables expand, seeks public equity
By Duruthu Edirimuni
Sierra Cables is planning to raise funds from the public through an IPO to increase its production capacity for the export market, retire long-term debt and strengthen the working capital position of the company.

"We are issuing around 20 million shares which is 40 percent of the total shareholding," Frank Irugalbandara, Chairman, Sierra Construction the holding company of Sierra Cables, told The Sunday Times FT. He said the company is seeking to launch the share issue as early as possible to upgrade its factories and machinery to meet new demand mainly from India, boosted by the Free Trade Agreement (FTA) between the two countries.

Though the company has large orders and has the potential to grab competitor market share, the company has not been able to achieve this due to working capital constraints.

From Sierra's total volumes of copper based products, it exports around 40 percent to India. "Due to the FTA, India can buy copper based products at zero duty," Shamendra Panditha, Director, Alucop Cables which is part of the Sierra Construction Group said.

"By increasing our production levels, we hope to increase exports up to 60 percent in 2005," he said. Panditha said India's requirement is so huge that Sierra's entire production can be sold to one customer in India.

The requirement in India is nearly 60,000 metric tonnes per year," he said adding, Sri Lanka produces less than 10,000 metric tonnes per year. "We are also tapping the African market," Irugalbandara said. The two were joined by Priyantha Perera, Chairman, Sierra Cables during the interview.

The company is tapping India and Maldives both with enamel and PVC cables and thus needs enhanced production capacity. "If the response for the IPO is good, we will consider releasing more shares to the market," Irugalbandara said.

Perera said turnover rose to Rs. 600 million during the last financial year ended 31 March 2004 whereas in FY2001 the company recorded only Rs. 100 million in turnover. "This year we are targeting Rs. 800 million to one billion turnover," he said.

Analysts said since Sierra is heavily involved with reconstruction in the north and east and with massive aid inflows expected, the majority of the funds are likely to go to the construction industry, enabling the company to be able to obtain a considerable chunk.

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