LAUGFS to light up with Rs. 2.5 b IPO

Wednesday, 6 October 2010 00:28 - - {{hitsCtrl.values.hits}}

By Deepal V. Perera

LAUGFS Gas Limited (LGL), which began its business in a humble way in 2001 by entering into the LPG gas industry, announced yesterday that the Colombo Stock Exchange (CSE) had approved its application for listing on the Diri Savi Board.

Via the Initial Public Offering the Company will issue 75 million voting shares at Rs. 23 each (raising Rs. 1.72 billion) and 52 million non voting shares at Rs. 15 each (raising Rs. 780 million). Funds to be raised amounting to Rs. 2.5 billion will be to retire expensive debt, finance expansion and diversification.

Official opening of the IPO is 4 November whilst the public can begin subscription from 14 October.

The managers and registrar to the issue is the Merchant Bank of Sri Lanka. The joint placement agents to the issue are Capital Alliance Ltd., and Asha Phillip Securities Ltd.

Chairman LAUGFS Group W. K. Wegapitiya told Daily FT yesterday that the decision to list his company on the CSE was taken to achieve two main objectives

“One is to get rid of the high cost of borrowings and secondly, to expand our operations to greater heights in the current positive conducive environment,” Wegapitiya said.

He said that the demand for LPG in the country was now rising and by raising Rs.2.5 billion through public listing, the company would be in position to drive into the next level of operation, such as setting up its own storage facility and expansion of market share and logistics.

“We also hope to use this money for our future strategic investment plans, such as the leisure industry,” he added.

Commenting on the state of the LPG market in Sri Lanka, the Chairman of LAUGFS Gas said that the company was now at the most advantageous position since its only competitor was packing up to leave the country.

“Because of this reason, we see that the time is right to raise Rs. 2.5 billion through public issue. On the other hand, out of the total money raised, we are hoping to use Rs. 1 billion for our expansion drive and use another Rs. 800 million to set off our borrowings from the banks,” he said.

Wegapitiya said that over the past two years the LPG industry had been doing fine due to the decision taken by the Government to set up a pricing formula for the LPG industry.

“By stipulating a pricing formula, it guaranteed our margins. Since then, over the past two years, we have been doing fine and so has the LPG industry,” he said.

According to LAUGFS, the company currently has induced 500,000 domestic 12.5 kg cylinders to the market. “Currently we enjoy a 27% market share in the domestic LPG market and 60% in the industrial LPG gas sector and 80% in the auto gas category. Altogether we hold a 40% market share in the entire LPG sector in the country,” he said.

Chairman Wegapitiya also said that the future of the gas industry was very positive as the country’s economy was set to grow by 8% this year and demand of energy was therefore expected to rise. “To date we have invested a total of Rs. 5 billion in our company and listing the company at the CSE would usher in a new era for the company and the energy sector in Sri Lanka as a whole.”