Business Times

Odel's July IPO offers 11.52% stake

By Jagdish Hathiramani

Sri Lankan clothing retailer Odel announced this week it would offer up to 11.52% of its equity, or 16.7 million shares, in an Initial Public Offering (IPO) slated for July 5. Shares will be made available at Rs. 15 each across three categories, 1.2million shares allocated for employees, 3 million shares for retail investors, up to a 5,000 stake, and 12.5 million shares for non-retail investors, more than a 5,000 stake.

Application minimums are 100 shares. Leading up to a post IPO listing on the Diri Savi Board of the Colombo Stock Exchange, this 12-store retailer, which boasts 128,000 square feet of "world class shopping space" and 700 staff, expects to raise Rs. 250.5 million. The majority (approximately Rs. 150 million) of which is earmarked for business expansion, with the rest used to retire debt.

Odel's next addition is a new store set to open in July in Battaramulla. Meanwhile, according to the IPO's prospectus, Odel has seen its fortunesrise in 2010 after a stagnant run in 2008 and 2009, with revenues
increasing by almost Rs. 500 million to Rs. 2.4 billion in 2010. Also shown is that the company experienced year-on-year net losses of 11.1% for 2008 and 51.6% for 2009, followed by a net profit of 336.8%, or Rs. 141.8 million, for 2010.

The prospectus also indicates the company's earnings per share to be 1.1for the 2010 fiscal year, up from 0.3 in 2009 and 0.5 in 2008. Additionally, its year-on-year average return on equity was 15.5% in 2010, up from 5.5% in 2009 and 11.6% in 2008.

Numbers which are indicative of high expectations for the company for the coming year; according to Channa Amaratunga, Director of CT Capital, the Lead Managers to the Offer. Currently, the majority stakeholders in Odel are founder / chief executive Otara Gunewardene, who holds 80,833,100 shares or 63% of the company, a percentage that will be revised to 55.77% with the issuing of 16,700,000 additional shares at July's IPO; and her brother, John Keells Deputy Chairman Ajit Gunewardene, who has 40,416,900 shares or 31.51%, set to be revised to 27.88%.

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