Tess Agro PLC, a subsidiary of Tess Group of Companies will go for a Rights Issue to raise funds to the tune of Rs 59 million.
The company will utilize the funds to increase the working capital which is expected to boost the export volume of fish to the global market. The country regained the GSP plus facility in June 2017 which the European Union removed earlier.
However, the fishing resources improved only in October that year and the Group had difficulties in exporting the fish to the EU countries, Tess Group of Companies CEO/ Director Shiran Fernando told Business Observer.
“With the funds raised, the company will have the possibility of exporting more fish to the international market and earning more foreign exchange in return,” he said.
The Right Issue will comprise of 70,000,000 new ordinary voting shares at Rs 0.80 per share and 10,000,000 new ordinary non-voting shares at Rs. 0.30 per share by way of a Rights Issue payable on or before 1st June 2018.
Approval, in principle, has been obtained from the Colombo Stock Exchange to issue and list the new Securities, the company said.
Tess Agro PLC established in 1992 as the first cold chain operator in Sri Lanka has been dedicated towards the processing and distribution of superior seafood, since 2007. The Company obtained a listing by way of IPO on the Colombo stock exchange in December 2002.
During the past three years, the company had to face its biggest challenge as the European Union, which was Sri Lanka’s most lucrative market, decided to ban Sri Lankan fish being imported into the EU.
Prior to the ban imposed in January 2015, the EU accounted for nearly one-third of Sri Lanka’s fish exports in terms of volume and about 40 per cent of the exports in terms of revenue. Against the total fish export earnings of $ 267 million that year, Sri Lanka earned $ 108 million from Europe.
During the EU ban the company continued to carry out its business with the help of its Belgium branch by importing from other neighbouring countries such as Maldives and Philippines, hoping that when Sri Lanka is back in business we would still hold on to our market share.
However, owing to the past performance, the company accrued losses and its debt position primarily due to the ban, has resulted in a poor cash flow, preventing the company from taking full advantage of the GSP plus tax benefit.. It can be noted that there is a significant increase of exports from Sri Lanka which is 376 % increase from 2016 to 2017 and accounts to almost 40 % of the total revenue in 2017 as opposed to 8 % in 2016, which is mainly attributed to the GSP + concession. Due to the current GSP + concession the company has the ability to increase revenue similar to its performance in 2010, 2011 (Rs. 771 million and Rs. 952 million), when the Sri Lankan fisheries industry was booming before the loss of GSP+ in 2012.
The rights issue proceeds will help the company to go for higher volumes of purchases from Sri Lanka to boost its exports and make use of the GSP concession for Sri Lanka exports to the EU.