Heladiv to take a better route for Ceylon Tea than Lipton

HVA Holdings Chairman Rohan Fernando (second from left) at the briefing of the Company’s IPO last night. He said bumblebee has defied aerodynamics by being able to not only fly but also make some honey.

This he said was the ethos and the motivation at HVA which is identified as the most innovative and diversified value added tea exporter in Sri Lanka. Directors Anil Vitarana, Paul Ratnayake and Harsha Fernando are also present – Pic by Daminda Harsha Perera

Heladiv to take a better route for Ceylon Tea than Lipton

• Most innovative and diversified value added tea export firm unveils key initiatives to grow big encouraged by two decades of success from small beginnings; launches IPO to raise Rs. 319 m
• Makes good inroads to giant Chinese market with 10 franchise outlets; to expand to 100 in three years;  Vies prospects in India and Russia for same
• Fully-fledged R&D team is developing tea based products for pharmaceutical, beauty care and hospitality industries

Inspired by the fact that world famous Lipton thrived from Ceylon tea, an equally determined and spirited Heladiv brand promoted by HVA Holdings is now bracing itself to grow its footprint globally in the high potential and fast growing health centric and lifestyle driven value added teas.

With its origins in 1990s, HVA, the pioneering iced tea exporter from Sri Lanka, has carved its own niche in the global market and yesterday it officially launched the Initial Public Offering (IPO) to raise Rs. 319 million to fund its business as well as ambitious yet credible ground breaking initiatives onto the future. Via the IPO HVA Group venture HVA Foods Ltd., is offering a 30% stake or 19.928 million shares at an attractively priced Rs. 15 now open for subscription whilst the official opening is 12 January.

Boasting a wide range of 80 products HVA last year had exported slightly over 600,000 kilos of value added tea to 35 countries. In 2009/10 financial year it had made a profit of Rs. 54.2 million up from Rs. 14.8 million in the previous year. The revenue amounted to Rs. 488.2 million up from Rs. 402.4 million in 2008/9. In the first half of 2010/11 financial year profits had increased by 62% to Rs. 27 million whilst the revenue amounted to Rs. 285 million, up from Rs. 252 million in the corresponding period of last year. Whilst the country’s value added tea exports have stagnated as a percentage of total exports, HVA has managed to grow largely on account of its innovation and diversification.

Apart from exporting value added teas HVA also focuses on tea tract based products, tea concentrate based product and a unique franchise operation.

The Heladiv brand is registered in 42 countries and PriceWaterhouseCoopers has valued the brand at around US$ 1.08 and $ 1.24 million. Part of the IPO’s proceeds (Rs. 45 million) will be used to buy 100% rights if the Heladiv brand to HVA Foods from parent HVA Holdings. This acquisition will give HVA Foods total jurisdiction over the brand globally.

A further Rs. 95 million will be spent to reduce gearing of the Company and Rs. 102 million for the upgrade of HVA’s iced tea plant. Balance funds raised via IPO will be utilised to finance the incremental working capital including retirement of the expensive short term borrowing.

“This is a very exciting year for Heladiv as we continue to get closer to our growing customer base globally. We believe the IPO is a unique opportunity for our customers and the wider investor community to get even closer to our brand,” HVA Lanka Chairman Rohan Fernando said.  “We are delighted at the level of interest and excitement that the IPO is generating,” he added.

He said that most global tea brands including the world famous Lipton originated from Sri Lanka. Lipton emerged as a multinational via Ceylon tea and we are inspired by the same feat as we differentiate from the rest to tap for more opportunities in this US$ 15 billion market,” Rohan said.

HVA has already set up exclusive franchise operations under the sub brand Infinity offering gourmet tea in China opening 10 outlets. “We hope to expand this footprint with around 100 more outlets in the medium term as well as tapping opportunities in Russia and India,” he said. According to him these three markets command a population of over 3 billion who savour tea in their daily life. China is the world’s biggest producer and consumer of tea followed by India whilst 240 countries import tea.

He also said that globally consumers are moving towards non-carbonated drinks and tea is gaining greater share of throats. Additionally the food and beverage market prefers health supportive products and in this context HVA products are ideally placed to serve this trend.

HVA’s full-fledged Research and Development team is developing and testing products that can support demands in pharmaceutical, beauty care and hospitality industries. The Heladiv Innovative Centre tea is extracted from tea fibers or Broken Mix fanning’s through a hygienic process by using modern technology. The extracted tea essence is further processed into a range of Heladiv read to drink ice teas whilst the non-soluble tea is being tested for other uses.

Acuity Partners which is the financial advisor and managers to the IPO described the pricing as very attractive given the future upside of the Company’s earnings. It described tea as a profitable, price-inelastic product globally with strong growth potential. “HVA being the most innovative and diversified product gives it greater potential,” Acuity Partners Vice President Corporate Finance Sheehan Corey said.