Palm Garden, Eden announce Rs. 28 b mega Rights Issues

• Funds will be used to rectify serious loss of capital in both companies
• Despite boost to balance sheet, investors appeared wary over move as share price of two companies dip sharply

Palm Garden Hotels PLC and its associate Eden Hotels Lanka PLC yesterday announced plans to raise a staggering Rs. 28.3 billion via separate Rights Issues.

Funds raised will be used to rectify the serious loss of capital of both companies.

Palm Garden announced a Rights Issue of 10 new Ordinary Shares for every one Ordinary Share held at Rs. 41 each to raise Rs. 17.74 billion. Its net asset per share is Rs. 12.19 whilst the share price yesterday closed at Rs. 46 down by 18% or Rs. 10.30 from the previous day.

Eden announced a Rights Issue of 2 new ordinary shares for every one held at Rs. 10 each to raise Rs. 10.56 billion. Eden’s net assets per share is Rs. 3.54. Its share price declined by 24% or Rs. 3.70 to close at Rs. 11.80 yesterday.

As at 31 March 2023 at Palm Garden the equity has eroded to less than 50% of its stated capital. Stated Capital is Rs. 2.43 billion and total equity was Rs. 527 million. Palm Garden had negative revenue reserves of Rs. 3.67 billion.

Eden’s equity has eroded to less than 50% of its stated capital. Capital is Rs. 5.8 billion and total equity was Rs. 1.86 billion. Eden’s revenue reserves were a negative Rs. 7 billion.

In FY23, Palm Garden Hotels’ gross profit nearly doubled to Rs. 1.5 billion from Rs. 812 million in the previous year on the back of 107% rise in revenue to Rs. 2.25 billion. Group operating loss remained at Rs. 1.3 billion due to rising cost. Pre-tax loss was Rs. 8.7 billion up from Rs. 3.7 billion in FY22 due to net finance cost rising by 189% to Rs. 7.5 billion in FY23.

Eden saw group revenue doubled to Rs. 2.25 billion whilst gross profit grew to Rs. 1.5 billion from Rs. 812 million in FY22. Pre-tax loss doubled to Rs. 6.3 billion due to more than doubling of finance cost to Rs. 5 billion.

Palm Garden Hotels owns 49.5% stake in Eden along with 42.6% by Browns Hotels and Resorts. The Public Holding percentage as at 31.03.2023 is 7.85% comprising 6,911 shareholders.

Browns Hotels owns 89.38% stake in Palm Garden. The public holding percentage as at 31.03.2023 is 10.622% comprising 2,232 shareholders.

The value to be raised by Palm and Eden via Rights is among the highest in recent years. Related party Browns Investments PLC (BIL) raised a staggering Rs. 19.2 billion in tough market conditions amidst COVID-pandemic in August 2020.

In 2013, JKH had a Rs. 23 billion Rights Issue with  warrants (worth Rs. 16.7 billion) attached making a total of Rs. 40 billion.