Sri Lanka's Vallibel One Private Placement, Biggest Ever, Rushed by Investors

17th january 2011, srilankastockpicks.blogspot.com

The biggest-ever private placement worth a staggering Rs. 4.9 billion floated by Vallibel One Ltd. (VOL), the first holding company of young business leader Dhammika Perera, has been snapped up even before its scheduled opening later this week.

The placement offered 160 million shares at Rs. 25 each with an option to issue a further 36 million shares at the same price in the event of an oversubscription of the former figure.

VOL sources said that both options were fully taken up by last week. The offer was to formally open on 18 January and close on 21 January.

Given the oversubscription, the planned post-private placement IPO is now likely to have a lower amount of shares for the public. Originally the IPO was planned to offer 21.3 million shares at Rs. 25, same price at which private placement was concluded.

Post private placement and IPO, Dhammika will hold an 80% stake in the company, which is steered by a Board of Directors comprising top professionals.

VOL is a diversified holding company with strategic investments in financial services, tile and sanitary ware manufacturing, and leisure. Sector specific operations are carried out through its subsidiaries, namely LB Finance PLC, Royal Ceramics Lanka PLC and Greener Waters Ltd., the leisure venture arm of the company. Further, the company holds 15% of Sampath Bank PLC, which is treated as a strategic long term investment.

The Rs. 4.9 billion private placement was floated to part finance investment of up to Rs. 2 billion in leisure sector projects in Sri Lanka. The company will engage in leisure sector projects through its fully owned subsidiary, Greener Waters Ltd., which is investing in a 382 room, luxurious five star resort, to be located in Kochichikade, Negombo.

The company has already invested in the 14 acre land at a cost of Rs. 268.06 million. The initial design concept for the hotel was carried out by WATG of Singapore, one of the world’s leading design consultants for the hospitality, leisure and entertainment industry. The first stage architectural designs have already been completed and detailed designing in terms of M&A designs and landscape designs are currently in progress.

The hotel will target the high end of the tourist segment and will be positioned as a five star hotel. The starting gross Average Room Rate will be US$ 180 and will increase to up to US$ 220 in the fifth year of operation, as per the private placement prospectus.

Additionally, funds raised via private placement will also part finance investments of up to Rs. 1 billion in selected power sector projects in Sri Lanka and part finance investment of up to Rs. 1 billion in other related investments.

With regard to the power sector, the company will look at acquisition of both operational private power producers and green-field development projects.

Equity finance for power sector investments will be part financed utilising Issue proceeds and proceeds from the proposed IPO.

In addition to raising funds to finance investments, the private placement is also expected to enable a broader scale of Qualified Investor ownership and access to capital markets via the proposed IPO subsequent to the Issue.

According to the prospectus, the management of VOL One is constantly evaluating suitable investment opportunities that fall within the vision of the company.

VOL is to be positioned as a leading investment holding company in Sri Lanka. In addition to creating value in the core business segments falling under RCL, LB Finance and Greener Waters, the company has evaluated several business opportunities in the power segment.

Whilst Dhammika Perera is the Chairman and Managing Director of VOL, Nimal Perera is the Executive Vice Chairman. Other Board members are Attroney at Law Harsha Amarasekera (Independent Non-Executive Director), banker Kimarli Fernando (Independent Non-Executive Director), Senior Partner and Country Head of KPMG Ford Rhodes Thornton & Company Rajan Asirwatham (Independent Non-Executive Director) and LB Finance Managing Director Sumith Adhihetty (Non-Executive Director).