Sri Lanka’s Laxapana Batteries Plc to diversify and invest Rs. 1 billion in renewable energy
Laxapana Batteries Plc of Sri Lanka is reportedly diversifying into renewable energy with an investment of over Rs. 1 billion, of which Rs. 540 million will be sourced via equity.
According to the local media, the company has announced a Rights Issue of 12 new shares for 13 held at Rs. 15 each, which will entail issuance of 36 million shares worth Rs. 540 million.
The Board of Directors has reportedly resolved that, in their opinion, the consideration for which the shares are to be issued is fair and reasonable to the entity and all existing shareholders.
EB Creasy holds a 51% stake in Laxapana Batteries Plc whilst it has 1,556 public shareholders holding a 34% stake. The stated capital of the company is Rs. 138 million, the Daily FT has stated.
In a filing to the Colombo Stock Exchange (CSE), the company has reportedly stated that it intended to look into long-term debt to benefit from the prevailing low interest regime. It does not hold any long-term debt presently.
Laxapana Batteries Plc was set up in 1956 to manufacture dry cell batteries and at that time, it was one of the first industrial ventures set up to cater to the needs of rural hinterland of the country.
By 2012, the company lost its competitiveness due to open market policies and technological developments in the dry cell batteries and ceased manufacturing operations.
The Laxapana brand, however, established in 1956 and synonymous with the first major hydropower scheme in the country (established a few years prior in 1950), enabled the company to continue trading in a variety of imported dry cell batteries and LED lighting.
According to the media report, the Directors have been aware of the need to develop a sustainable business model since it ceased to manufacture dry cell batteries and have been looking for low-risk opportunities to diversify the company’s trading and to enhance income streams so that shareholders are guaranteed a reasonable return on their investments.
The Board has identified opportunities in the renewable energy sector that are in alignment with the Sri Lankan government’s policy of increasing the share of renewable energy production in the nation’s total energy needs.
Having evaluated prospects in this space, the company is looking at invesingt over Rs. 1 billion in generating renewable energy over the next 18 months.
“The Board is confident that subject to any unforeseen circumstances, the investment will generate adequate returns to shareholders,” the filing to the CSE has stated.
OSL take:
The expansion of its business portfolio announced by the local company indicates the growth and strength of Sri Lanka’s private sector as well as the growing business/investment opportunities in the country’s renewable energy generation sector. Given Sri Lanka’s economic expansion and resilience in the face of the global Covid 19 pandemic, foreign businesses could explore opportunities in forming partnerships/joint ventures with local companies. As for renewable energy generation projects, the government of Sri Lanka is committed to assign a 70% share of the country’s power sector to renewable energy generation. This has opened up a host of business/investment opportunities in Sri Lanka’s renewable energy generation sector.
| Article Code : | VBS/AT/15122020/Z_2 |