Hela Apparel announces partial changes to allocation of IPO funds

• Unutilised Rs. 2 b will be channelled to retire short-term debt

Hela Apparel Holdings PLC has announced a move to strengthen its balance sheet by optimising the funds arising from its Initial Public Offering, whilst remaining committed to the objectives listed in the IPO Prospectus.

In a disclosure to the CSE, Hela said unutilised funds of Rs. 2 billion as of 31 March will be invested into subsidiaries of the Group for the purpose of Retirement of Short-Term Debt. As such the total amount allocated under this objective will increase to Rs. 3.9 billion.

Group CEO and Executive Director Dilanka Jinadasa said the company is facing delays in finalising the target Rs. 1 billion investments on the Fabric Mill due to the prevailing economic environment in Sri Lanka. 

Furthermore, in line with the expected utilisation timeline, the company plans to complete the Productivity-Enhancing Capital Expenditure as mentioned in the Prospectus after the commencement of the second quarter of FY 2022-23, provided economic conditions are favourable at this time.

Noting that Rs. 596 million funding the implementation of a New Enterprise Resource Planning (ERP) System is underway, Hela said a portion of the required payments are linked to the dollar and are therefore subject to further depreciation in the rupee. For this project Rs. 95 million has been spent as of 31 March. 

In order to avoid the impact of further depreciation in the currency on the remaining funds allocated to these objectives relative to the company’s dollar-denominated investment requirements and borrowings, Hela said it wishes to immediately divert them to equity investments into its subsidiaries for the purpose of settling additional debt.

This includes rupee-denominated debt and dollar-denominated debt, which will be settled by using the funds to finance local operating expenses and diverting a portion of dollar export proceeds to debt settlement. Rs. 2.4 billion is allocated as Investment into Subsidiaries of the Group and Rs. 1.9 billion had been used as of 31 March.

The company will seek Related Party Transactions Review Committee approvals for the disbursement of funds. The Board of Directors of each subsidiary will also determine the consideration for which the shares will be issued and be required to opine that such consideration is fair and reasonable to the company and to all existing shareholders.

The Hela Board of Directors also reiterated that the company is committed to the objectives set out in the Prospectus and will provide further disclosures to the market as appropriate.

“Supported by its strengthened balance sheet, the required funding for these objectives will be obtained via additional term loans or available cash balances as determined appropriate by the company. Shareholder ratification for the deviations pertaining to the IPO fund utilisation will be obtained at the next immediate General Meeting of the company,” Hela Apparel Holdings added.