Hela clothing to raise Rs. 4 bn via listing, eyes first-mover advantage on global supply restructuring
Given the exponential rise in freight rates, lead times and changing economic fundamentals due to the C-19 pandemic, Hela clothing is looking to be a global leader in apparel manufacturing through an increased presence in the African region.
Hela clothing has already ventured into Ethiopia, Kenya, Tanzania, and Mozambique. Hela clothing is hoping to raise Rs 4 billion by way of listing to help restructure its balance sheet (Rs. 2 bn), invest in fabric manufacturing (Rs. 1 bn) and other process improvement investments (Rs. 1 bn).
Group CEO Dilanka Jinadasa categorized Africa as the ‘last great frontier’ in global manufacturing outsourcing at the investor and media event for the coming IPO at the Galle Face Hotel.
A facility to be opened in the coming weeks in Egypt is set to further increase the competitive edge of the Hela clothing group by offering global buyers in the US and Europe shipping times of as short as 12 days and 3 days respectively. The facility also benefits from indefinite duty-free access to the EU and UK through a bilateral free trade agreement and to the US through a Qualified Industrial Zone programme.
Jinadasa noted that historically the firm used to source fabric from Vietnam but given the supply chain disruptions they found it easier to work with a Tanzanian firm.
Hela CFO Moiz H Rehmanjee noted that the company was looking to continue its CAGR of 15.1% and its Net Profit CAGR of 45.8%. Though the 2021 financial year was impacted by the COVID-19 pandemic the company has recovered and shown growth in the next period. The funds raised will help create supply chain resiliency for the group.
Rehmanjee noted that Central Bank rules surrounding the conversion of export proceeds had limited impact on the group as the way computed on the residual figure.
CTCLSA and Capital Alliance are the managers of the issue and they expect the company at the IPO price of Rs. 15 to represent a 5.7% dividend yield at the expected 33% dividend payout ratio. The company is priced at a 10.5 Price to Earnings ratio while firms in the broader industry trade at 14.5.
The major shareholder Lesing Hela (A trust benefitting the family of Tom Singh) alongside other shareholders shall be locked into the company for 6 months post the listing.
The IPO is the largest listing for the last 11 years and is expected to bring additional liquidity to the stock exchange.