The Expo Lankan Holdings Group, fresh from launching an Initial Public Offering (IPO), on Tuesday said that it is eyeing inorganic growth and that acquisitions are on the cards in the medium term. “We are interested in acquisitions relating to the areas in which we are already in, in the mid term as we want to grow inorganically,” Sattar Kassim, Group Director Expolanka told the Business Times on the sidelines of the media briefing to launch their Rs. 2.4 billion IPO. He said that the offer for 172 million ordinary voting shares at Rs. 14 each opens on May 12 and the subscription list would close on June 2, unless the issue is oversubscribed prior to this date.
Haniff Yusoof, Group CEO told the Business Times that 47 firms come under the holding company while two others relating to garments and aviation are not included. “This is because we sold Denshun, a garment / apparel firm and we didn’t want Expo Aviation in the IPO as it wasn’t profitable,” he explained. He further said that the main reason behind selling Denshun was that this 200-machine garment factory didn’t have economies of scale while with the war ending and opening up of roads, the flight business wasn’t anymore profitable.
He added that Expolanka will use Rs. 1 billion of the IPO cash to enhance its working capital of specific entities of the group with a view to increase operating capacity, measured by the volume of activity at its main business segments. The proceeds will be managed by the Corporate Treasury Department of Expolanka Holdings. The company expects to start utilising the proceeds from June 2011.
He added that they will use a further Rs. 500 million to expand its existing warehouse capacity to increase the group’s expansion into the local transport and logistics sector from September 2011. Mr. Yusoof said that Expolanka will be utilising a land they own at Orugodawatte for this exercise and will focus on warehousing solutions for the apparel industry.
Mr. Kassim said that their herbal medicinal product, Barakha will also see its range expanded. “We went into a 65,000 square feet factory nearly two months ago as we had a space constraint. We plan to get into allied products and further expand this range,” he added.
The group’s main line of business is in logistics, accounting for 71% of group profits of Rs. 1.92 billion for the nine-months ending December 31, 2010, contributing some 53% of group revenue amounting to Rs. 25.8 billion for the same period. Mr. Yusoof said that the company will utilise Rs. 908 million to reduce outstanding long-term debt amounting to Rs. 1.8 billion. This would be done from August 2011.
Founded in 1978, Expolanka is Sri Lanka’s largest logistics company and has become a significant presence in Asia as well as in the Middle East and African regions. Apart from their core business in logistics over the years Expolanka has also branched into numerous related fields such as import/exports, manufacturing and other strategic investments.