Financial Times

Aiming to be Sri Lanka's next conglomerate
Vallibel to add 1,000 hotel rooms
Vallibel Holdings, owned by the investor Dhammika Perera, whose forays in the stock market are keenly followed by others, has an ambitious plan to build 1,000 more rooms by end-2007 in a Rs 6 billion hotel spree. The projects include a new 250-room hotel on Galle Road.

The group, whose main sectors now include finance, manufacturing, leisure, power and exports, aims to eventually become a conglomerate like Hayleys, Dhammika Perera's investment advisor Nimal Perera said.

"Dhammika is only 37 years old and Vallibel is a 7-8 year old company," Nimal Perera told The Sunday Times FT in an interview. "We want Vallibel to be one of the largest companies in Sri Lanka."

Nimal Perera was originally Dhammika Perera's friend and now manages the latter's investments. He is also the joint managing director of Royal Ceramics, and he is also finance director for the other firms owned by Dhammika Perera who was abroad at the time of last week's interview.

"Right now our major plan is to have 1,000 luxury rooms in Sri Lanka before the end of 2007," Nimal Perera said. "We started with The Fortress which should be ready by end-November 2005. We plan to complete all hotel projects by end-2007 under Vallibel Leisure."

The total investments in the hotel projects envisaged by the Vallibel group amount to around Rs 6 billion. Vallibel will have a controlling stake in the hotels, either directly or through its Connaissance Holding subsidiary, and go with strategic partners and issue shares to the public to raise the balance funds.

Most of the luxury hotels will be managed by international chains. "We believe luxury hotels need foreign know-how and technical back-up," said Nimal Perera. "They have the expertise in positioning and in PR."

The Fortress in Koggala will have 50 luxury rooms with the average room rate being around $450 and going up to $1,500 for one of the two presidential suites. The total invested will be nearly Rs 1 billion. It will have 20 swimming pools - one full-size pool and the others are to be plunge pools in different kinds of rooms.

MJF Group, better known for its Dilmah pure Ceylon tea brand, has a 30 percent stake in the hotel. The Fortress, previously known as Ruhunu Hotels, is run by the Maldivian management company Per Aquum Resorts and Spas and its rooms have already been sold for this winter season.

"We're very happy about their performance," said Nimal Perera. "The entire industry knows about The Fortress now. Per Aquum has PR agents in major cities like London, Paris and Berlin and also advertised in top travel magazines." Vallibel has bought an 11-acre land in Mirissa for Rs 130 million to build a luxury resort with 300 rooms the total cost of which is Rs 1.5 billion. It has bought five acres in Wadduwa for a 150-room four-star hotel called The Beach. Total investment is Rs 500 million.

Vallibel is also planning a 250-room hotel in Colombo on the Galle Road between Bambalapitiya and Colpetty with a total investment of Rs 1.5 billion. "This is because we don't have a city hotel," explained Nimal Perera.

A 50-room luxury resort called The Woods is to be built in Nuwara Eliya with a total investment of Rs 500 million. The land has already been acquired. In Dambulla, Vallibel has bought 10 acres next to Culture Club, which is owned by Connaissance, and aims to build a luxury resort with 40-50 villas, Perera said. In Kandy, it bought a property a month ago adjoining Le Kandyan, again owned by Connaissance, to put up 15 villas with a spa at a cost of Rs 100 million.

Vallibel has a 52 percent stake in Connaissance Holding Ltd. but has retained Chandra Wickramasinghe as chairman, with Dhammika Perera being deputy chairman and Nimal Perera becoming group finance director. Connaissance currently owns and operates Culture Club Resorts, Le Kandyan Resort, The Reef in Hikkaduwa (formerly Reefcomber) and the Eco Lodge in Dambulla. It also manages Unawatuna Beach Hotel in Galle.

Connaissance has established ayurveda centres in all hotels and is expanding its hotels portfolio and focusing on niche markets in an effort to raise profitability and tide over lean periods during the traditional off-season. Nimal Perera said that while The Fortress was approved before the 100-metre coastal buffer zone rule was introduced, Vallibel's hotel projects in Wadduwa and Mirissa might be affected by it.

"The only problem is the 100-metre rule," he said. "I hope the government will be flexible and go on a case-by-case basis. Dhammika has invested all his money in Sri Lanka, not abroad, where there are so many opportunities with beach properties on other islands such as the Maldives and Mauritius. But we believe Sri Lanka is the most important place to invest in."

Perera said that Vallibel might later consider investing abroad in islands like the Maldives, Mauritius and the Seychelles some of which they have visited and done studies on. Vallibel is now focussing on power and leisure. "That's where the money is," Perera said. In finance, Vallibel owns LB Finance and Pan Asia Bank, where it's the largest shareholder.

"Dhammika's style is to restructure companies into which he puts money," Nimal Perera said. "We usually take sick companies. LB Finance we turned around. We did the same with Pan Asia. We try to retain the original management and we only put our hands into finance."

Vallibel plans to list Pan Asia Bank on the Colombo Stock Exchange in April by way of an introduction. Asked why this method was chosen instead of a public offer, Perera said: "We have the required capital. So the board did not want to increase the capital and dilute their stake."

Dhammika Perera buys HVA tea
Dhammika Perera has made his first foray into exports with the Vallibel Group's acquisition of HVA Lanka which is known for its Heladiv brand of Ceylon tea. "With this acquisition we got into tea because we did not have an export arm," explained Nimal Perera, Dhamikka Perera's investment advisor. "We want to get into tea, which, apart from tourism and garments, is Sri Lanka's main revenue earner."

Vallibel bought a 51 percent stake in HVA for almost Rs 50 million and aims to turn the company around. It has retained the same HVA management with Rohan Fernando remaining as managing director.

HVA was courted by a mysterious foreign firm called Misty Mountains a few months ago but the deal fell through as the latter was unable to cough up the cash to buy the tea company.

The HVA Group was set up in 1990 and has been the winner of six Gold Awards as the most outstanding Exporter of the Year in both traditional and non-traditional exports.

Its Heladiv teas come in regular tea bags, green tea and flavoured green tea bags. It also makes ice tea, leaf tea in pouches and pet jars, herbal infusions and gift packs.

The company has said it hopes to expand its range of flavours, produce liquid tea concentrate for beverage companies for vending machines worldwide, and make instant tea powder and tea in tablet form.

Back to Business