Lofty Plans - Sri Lanka's Odel may consider a high-rise shopping mall
A unit of Sri Lankan high-end retailer Odel may reconsider to build a shopping mall with the parent firm making a full provision to cover a 45.2 million rupee loan due from the unit, its share issue prospectus showed.
A unit of Sri Lankan high-end retailer Odel may reconsider to build a shopping mall with the parent firm making a full provision to cover a 45.2 million rupee loan due from the unit, its share issue prospectus showed.
"Although yet to commence operations, this Board of Investments (BOI) approved company was incorporated to plan the preliminary activities required to construct a high-rise shopping mall complex," its prospectus said.
On July 24, 2006, the subsidiary Odel Lanka had inked a deal with the Sri Lankan investment agency granting it a tax holiday for the first six years after the mall commencing operations.
After completion of the tax holiday Odel Lanka would pay taxes at a concessionary rate of 10 percent for two years and 15 percent for a further two years, its prospectus said.
Other group companies Odel Technology Services (Private) Limited, and Odel Properties (Private) Limited have also been granted similar tax concessions by the BOI.
Odel plans to raise 250.5 million rupees from an initial public offering (IPO) next month to retire short-term debt and expand.
The group had take 1.671 billion rupees in debt, and has paid back 665.3 million rupees, its prospectus showed.
However, Odel founder and chief executive Otara Gunawardene would not say if cash generated from the IPO would be used to build the shopping complex.
At the IPO media conference officials from Odel did not reveal how much the shopping complex would cost to build.
A 45.2 million rupee loan taken from the parent by Odel Lanka had been fully provided by the parent Odel Limited in the financial year ending March, 2010, its accounts made public for the first time showed.
"Odel Limited is not in a position to recover the same as at the date of submitting the application," Odel in its prospectus said.
Odel has four outlets in Colombo and an outlet each in the suburbs of Katunayake airport, Ja-Ela, Kohuwala, Nugegoda, Mt. Lavinia, Moratuwa, Panadura and Maharagama.
Odel is studying to pick the best locations for more branches to be opened in the next 18 months, the company said.
"We are certainly not going to lower our quality standards or price," said Gunawardene replying to a query on Odel's brand positioning when expanding out of Colombo.
"It is essential that at Odel we maintain our brand image; we will not go everywhere and dilute our brand value."
The retail chain's profits for the financial year ending March 2010, revealed for the first time, were up 313 percent from the year before when sales were flat because of the economic slowdown.
Sales were up 23.8 percent to 2.41 billion rupees, but income from exports had come down 89 percent to 2.18 million rupees.
About 75 percent of its revenues come from the sale of clothes, while the rest is made up of rent, high-end ornaments and other collectables.
Odel made 66 million rupees in rent income from renting out its premises to perfumery, personal care and food vendors.
About 40 percent of Odel's clothes are imported, while the rest are bought from stock lots from Sri Lankan garment manufacturers and produced at its own factories and sub contactors, Nishan Fernando, chief financial officer at Odel said.
Its own niche Odel branded garments generate about 10 percent of revenues, while its garment factories produce five percent of its sales needs, Fernando said.
Odel's IPO would be open to the public to subscribe from July 05, 2010, and would close on the July 22, 2010 or on an earlier date if the issue is oversubscribed, its prospectus said.
(Source: LBO – 23rd June, 2010)