Sri Lanka’s Hela Clothing delays investments and settles debt amid soft-peg meltdown

ECONOMYNEXT – Sri Lanka Hela Clothinga clothing exporter said it has delayed investment and will use around 1.5 billion rupees from an initial public offering to settle its debt, as the island’s loose peg to the US dollar collapsed after two years of printed money to keep interest rates low.

Hela Clothing raised Rs 4.0 billion in the IPO and planned to invest Rs 999 million in a fabric factory to boost productivity by the second quarter of the current fiscal year.

“The company is facing delays in finalizing the target investment due to the prevailing economic environment in Sri Lanka,” the garment exporter said on the stock exchange.

Projects will be completed after the second quarter “provided conditions are favorable” at that time.

The company had spent 95 million rupees of the 596 million rupees allocated for enterprise resource planning (ERP) software.

Out of 2.4 billion allocated to be invested in subsidiaries, 1.9 billion rupees have been spent.

Planned investments were tied to dollar costs.

The Sri Lankan rupee fell from 200 to 380 against the US dollar after a float that has yet to succeed and currency shortages persist, making it difficult to import.

The sharp depreciation of the rupee reduced the real value of the rupee proceeds from the IPO.
About Rs 2.0 billion remained from the IPO.

“In order to avoid the impact of further currency depreciation on the remaining funds allocated to these purposes against the Company’s investment needs and U.S. dollar-denominated borrowings, it therefore wishes to divert them immediately to equity investments in its subsidiaries for the purpose of settling additional debt under,” said Hela Clothing.

“This includes Sri Lankan rupee-denominated debt and US-dollar-denominated debt, which will be settled by using the funds to finance local operating expenses and diverting some US-dollar export earnings to settlement. debt.”

Sri Lankan interest rates have now corrected and lending rates have risen above 20%. (Colombo/May 28/2022)

Comments are closed.