Sri Lanka’s LTL group with record IPO to fly high in Africa
LTL Holdings aims to replicate success in East Africa, offering a blueprint for foreign investors after a record Initial Public Offering (IPO) in the Colombo Stock Exchange.
LTL announced the largest IPO in the history of the Colombo Stock Exchange, at Rs. 20 billion.
Explaining the company strategy, Nuhuman Marikkar, LTL Holdings CEO in an exclusive interview with The Sunday Times Business noted that the company cottoned onto regional plans after Sri Lanka achieved nearly 100 per cent of electrification. “Now we are at 99.5 per cent of electrification. We realised it’s time to find new markets and grow ourselves beyond our shores. We started with exporting Transformers made in Sri Lanka to Iraq. Since then, we never stopped going overseas,” he explained.
At the briefing: From left - Darshan Perera - Director/CEO NDB Investment Bank; Ravindra Pitigalage - Deputy CEO LTL Holdings; Nuhuman Marikkar – CEO LTL Holdings; Nalinda Elangakoon - Chairman LTL Holdings; U.D. .Jayawardena - Founder LTL Holdings; U. Gaminie Sarath - Deputy CEO (Finance) LTL Holdings; Zakir Mohamedally Group COO & Head of Investment Banking CT CLSA. Pic by M.A. Pushpa Kumara.
Subsequently, the company set up power plants in Bangladesh and Nepal and is now looking towards Africa. Mr. Marikkar further explained, “Most of Africa is generally electrified at 40 to 50 per cent. For the last 10 years, we have been there exporting our Transformers etc. Now our power plan is to move aggressively to that continent where the demand is. We are concentrating on countries, such as Tanzania, Rwanda, and Uganda which are less than 50 per cent electrified. Also, we can avail the tax benefits in those countries as a local company, while being close to customers, and helping to build local technical knowledge.”
He noted these countries are open for private sector investments with their legal systems etc. and friendlier for foreign investments. Mr. Marikkar said that the discussions with the authorities in these countries about setting up power plants are at a very initial stage.
The company is already constructing a transformer manufacturing plant in Tanzania with US$2 million. “Therefore, we will be more competitive in that market in the future,” Mr. Marikkar said.
When queried of the suitability of the macro environment where the public listing is launched (when polls are on), he replied, the IPO was planned for a long period with some projects in the pipeline needing funding.
He mentioned the fact that the company is commanding 70 per cent foreign currency-linked revenues in their power purchase agreements and operations and management contracts. “These are structures to hedge against exchange rate risks via tariff leakages to local and hard currencies together with inflation indexing, of the respective currency,” he said, noting this as another main reason to stage an IPO with polls around the corner.
“Since starting the company four decades ago, the only capital infusion of Rs. 100 million was in 1997. Now we are the largest power company in the country as well as in this region, surpassing more than 1100 megawatts (MW) in power. The decision to go for capital raising was to get power supply to the grid to make electricity available for the nation.”
The company has priced the share at Rs. 14.50. The valuation of the company stands at Rs. 93 billion, with 16.5 million shares but the management decided to split the shares as they realised the initial share price was higher. “This is why we decided to have a reasonable price to make it affordable for everyone. We aim for affordability and, a wide subscriber base with 500 shares each, especially for those with less than Rs. 10,000. Investors seek power sector opportunities with stable shares, aiming to brighten lives.”
Eventually, LTL aims to venture into green hydrogen manufacturing when this technology is commercially available. “We are trying to use our renewable energy to produce green hydrogen which can be used at our Sahasdanavi and Sobadanavi Power Plants,” Mr. Marikkar noted adding that Rividanavi which is the country’s largest solar power project with 100 MW at Monaragala, will attract other bigger investors, mainly from overseas. “Traditionally we have been having smaller power plants with five to 10 MW range. To attract foreign investors, we need at least plants with above 100 MW range,” he said.
The Rividanavi power plant is a blueprint for future foreign investments. “We sat with the relevant authorities for months, conducting extensive negotiations to draft these agreements. These are bankable for any foreign institution or lender. They cover any possible, aspects of rules and regulations, force majeure situations etc. Any investor can use this as a blueprint.”
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