Dilith-linked new hotel IPOs worth Rs. 478.5 m shine in gloomy market with oversubscription

Midst gloomy market conditions, the two IPOs worth Rs. 478.5 million of new hotel companies linked to high networth investor Dilith Jayaweera had been oversubscribed on their opening day itself yesterday.

Kalpitiya Beach Resort Ltd., offered 16.2 million shares at Rs. 17.50 each raising Rs. 283.5 million and Waskaduwa Beach Resort’s issue was 15.6 million shares at Rs. 12.50 each.

The companies announced the closure of the IPOs following subscription yesterday.

Dilith Jayaweera told the Daily FT that the two IPOs came to the market when overall investor sentiments were down hence the oversubscription on opening day was a significant achievement.

Interestingly the two IPOs weren’t advertised either therefore the oversubscription suggests spontaneous demand.

Analysts said that the two IPOs success also reflects overall optimism on the tourism sector’s prospects which have rebound following the defeat of terrorism in May 2009.

Both hotel companies will build 150-room luxury resorts each at a cost of over Rs. 2 billion.

The ventures are at the final stages of clearing the Environmental Impact Assessment requirements following completion of which construction is expected start early to mid 2012.

Whilst new investors have shown confidence on the two projects, in October existing shareholders of Citrus Leisure which owns 62% in Waskaduwa (Vallibel One holds 20% stake) and 76% in Kalpitiya, converted the first set of warrants infusing Rs. 944 million for luxury resort in Kalpitiya. The warrants issue was oversubscribed by 30%.

All major shareholders as well as others had converted the warrants. Citrus Leisure is owned nearly 37% by Divasa Equity Ltd, a company promoted by advertising industry trio Dilith Jayaweera, Varuni Amunugama Fernando and Sarwa Ameresekere.

Citrus late last year announced a multibillion five-year fund raiser inclusive of a Rights Issue backed by warrants exercisable in 2011, 2012 and 2015. The issue was oversubscribed with shareholders subscribing for an additional 7.9 million shares, an oversubscription of six times for additional shares.

The other two warrants (2012) and (2015) closed at Rs. 22 and Rs 17.20 respectively, also lower in comparison to last week. The conversion of 2012 warrants (amounting to 31.4 million) is also at Rs. 30 each whilst the 2015 conversion (63 million) is at Rs. 40 each.