Madulsima Plantations in Rs.1.4bn rights issue to settle debts

Madulsima Plantations PLC will be raising Rs.1.38 billion in a rights issue in the near future, to settle company’s outstanding debts.

Five new ordinary shares will be issued for each currently held ordinary share, for a total of 145 million shares, at a consideration of Rs.9.50 per share. The share closed at Rs.9.90 yesterday.

The current stated capital of the company is Rs.290 million.

The funds would be used to settle a debt of Rs.1.32 billion to the company’s two largest shareholders Melstacorp Limited and Stassen Exports (Pvt) Ltd. which own 33.17 percent and 31.20 percent stakes respectively, and to partially reduce an overdraft facility obtained from Hatton National Bank PLC.

According to the interim financial statements for the quarter ended March 2015, the company owed Rs.1.46 billion to related parties, which increased from Rs.1.29 billion for the quarter ended December 2014.

The bank overdraft increased to Rs.364.34 million from Rs.326.69 million. It had additional interest bearing loans and borrowings worth Rs.73.33 million, an increase from Rs.1.6 million.

The company had retained losses worth Rs.2.19 billion for the quarter. For the financial year ended December 31, 2014, the net loss was Rs.277.73 million.

Madulsima Plantations deals with tea and firewood. The tea industry had been beset by macroeconomic troubles in the international market, erratic weather as well as rising wages in the past year.

A recent outlook put the industry at a negative outlook in the short term, with moderate gains as the year goes on.