Browns Investments successfully raises Rs. 19.2 b via Rights

• Parent firm invests Rs. 10 b; ups stake in subsidiary to 46% from 33% previously
• Rs. 14 b from Rights to settle short-term debt from related parties
• Rs. 4.8 b to be invested in equity in Browns Hotels and Resorts to settle latter’s debt

Browns Investments PLC has successfully raised a staggering Rs. 19.2 billion from shareholders via a Rights Issue despite challenging market conditions amidst COVID-19 pandemic impact. 

The Rights Issue involved 9.579 billion shares on the basis of two new shares for every one held at Rs. 2 each. 

In a development that improves the Balance Sheet of BIL, the Rights Issue was oversubscribed with 9.6 billion shares worth Rs. 19.2 billion subscription in respect of Rights and additional applications. BIL’s net asset value per share as at 31 December 2019 was Rs. 3.42 and as at 31 March 2020 it was 3.48. Yesterday the share was trading at Rs. 2.40.

BIL’s parent Brown and Company PLC had subscribed for 5 billion shares thereby investing Rs. 10 billion. Following the subscription, Brown’s stake in BIL has increased to 46% from 33% previously. BIL has 18,047 shareholders with 21.26% held by the public. 

The proceeds from the Rights Issue are to settle short-term loans worth Rs. 14.3 billion given by related parties including Rs. 11 billion from LOLC Holdings PLC and Rs. 2.8 billion from SFL Services Ltd.

Separately BIL has Rs. 500 million in short-term debt obtained from other parties.

BIL will also use Rights proceeds to invest Rs. 4.8 billion in the equity of Browns Hotels and Resorts Ltd. (BHRL) which has invested in several leisure projects both in Sri Lanka and the Maldives. 

BIL is an investment company, income source being profits/losses generated from sale of investments, dividend income and investment income from loans given to its group companies. There is a decrease in investment income amounting to Rs. 331 million, compared to 2017/18 financial year resulting in a lesser financial performance in 2018/19. The company has incurred a loss of Rs. 318.6 million for the period 2018/2019. 

Group revenue for quarter ended 31 March was Rs. 1.6 billion, up by 6% and pre-tax loss was Rs. 1.4 billion and post-tax loss was Rs. 1.7 billion, as against a loss of Rs. 196 million a year earlier. For FY20, Group revenue was Rs. 5.6 billion, up by 10% whilst pre-tax profit was Rs. 7.5 billion as against a loss of Rs. 1.6 billion. Net profit attributable to equity holders of the company was Rs. 9 billion, as against a loss of Rs. 1.9 billion in FY19.

The investments made by the company so far, has been primarily funded through debt, particularly from related parties. The proceeds received from the Rights Issue will be utilised to settle a significant percentage of entity level intercompany debts which will strengthen the financial position of BIL, which will reduce the finance cost and improve the financial performance in future.

BIL’s investment portfolio consists of several industries, leisure being the most significant investment with investments in both Sri Lanka and Maldives. 

Apart from the four operating hotels, significant capital investments are at construction stage with one significant investment recently being completed and handed over to the operator (Sheraton Kosgoda Turtle beach Resort).

BIL said the Easter Sunday attack in Sri Lanka and COVID-19 pandemic undoubtedly will result in some short-term pressure on the sector, with operating hotels experiencing minimal tourist arrivals in the short term, however, recovery being expected in the coming months, with much interest is seen with the foreign tour operators committing for bookings in the coming winter season. Construction was halted in other sites which is to be commenced soon.

Apart from the investments made in to the leisure sector, BIL has further investments in Plantation and Agriculture, Renewable Energy, Construction and Real Estate.