The Colombo Stock Exchange (CSE) is a powerful platform for funding and is gaining attention among Sri Lankan corporates of all scales, as an opportunity to benefit from financial flexibility and a heightened global profile. The ability to tap into global capital without the restrictions inherent in traditional lending terms is an attractive proposition.
Hemas Holdings PLC is a Conglomerate listed on CSE with business activities in Consumer, Healthcare and Mobility. The company has been publicly quoted since 2003. Currently, Hemas Holdings PLC is one of the largest listed companies on the Stock Exchange.
Husein Esufally, Chairman Hemas Holdings PLC shared the company’s experience as a listed company on CSE.
Q: Raising funds via the exchange is an effective alternative to traditional funding means. What were your reasons for accessing funds for growth via the public market?
A: Preference for funding via the public market as opposed to traditional methods was driven by:
•Continuous access to large pool of funds from a diverse range of local and foreign shareholders
•Creating liquidity options for existing shareholders, and avoiding protracted disputes when Family members look to exit
•Heightened public image which helps attract strategic partners and high-quality talent
Q: At what point of the growth curve do you think a company in a similar market as yours should consider listing?
A: The potential entity should possess an established strategy, robust governance and controls accompanied by a recognized product portfolio. These three important elements will enable the Company to relate their journey, need for funding and future possibilities to the prospective investors in a manner that will enable future shareholders to understand the risks and rewards associated with the investment.
Q: In the local context, there is a hesitancy to access funds via the exchange. What do you think those reasons are and how would you address them for those on the fence?
A: Lack of knowledge among individuals and small and medium enterprises on the opportunity, process, benefits of listing
•Need for external expertise and costs associated with listing
•Necessity of fulfilling greater accountability and scrutiny
•Fear of loss of control or be a target for a takeover bid
•Perception that Listing requires disclosing important sensitive information which might be used by competitors to gain advantage
Continuous knowledge enhancing sessions catered more towards the small and medium players on how these challenges can be addressed and possibility of reducing such risks will help boost confidence. Further, assuring ongoing assistance post listing for such new entrants will also be useful in addressing their concerns.
Q: Many companies considering listing have concerns regarding one-time and ongoing costs associated with listing. Can you share your thoughts regarding the cost-effectiveness of raising funds on CSE?
A: The preliminary cost of listing is higher and the ongoing costs are lower. Listing enables access to a continuous pool of funds and is not a one-off exercise
• Cost effectiveness should be measured by comparing the overall net benefit vs prevailing interest rates
• As the tenor of funding stretches and interest rates in the economy pick up, funding via listed instruments will prove to be cost effective
Q: How should companies view organizational structure pre-IPO in order to ensure success post-IPO?
A: Companies should not view IPO as a one-off transaction.
• Conduct IPO readiness assessment well ahead of time to understand the gaps in processes, resources, systems and people
• Maintain strong governance and establish a strong Board with quality Independent Directors
• Ensure Organizational structure promotes independency of external parties such as Auditors, Banks
• Communicate responsibilities of being a listed entity to all levels of the Organization to ensure adherence with listing requirements
Q: Can you share your thoughts on the importance of effective communication regarding your future plans with your shareholders post-listing and how that reinforces the success of the share price?
A: The share price reflects investor perception of the ability of a Company to earn and grow. If Shareholders are happy with the performance and outlook, all external factors constant, there will be less unfavorable movements and volatility in the share price. Regular and transparent engagement with shareholders as well as general disclosure on future plans will keep them informed and not be subject to market myths. This will ensure that the share price will not be volatile in an ad-hoc manner.
Q: CSE provides access to raise funds globally. Do you have any thoughts or experience on how foreign investors add value to your company?
Foreign investors are generally medium to long-term oriented in their investments. This assists in maintaining a stable share price for the Company.
Q: How has your company adjusted to the current global environment?
In the recent past the global environment experienced volatility as a result of the pandemic. As businesses around the world adapt to the new norm, flexibility, agility and innovation have proven to be vital.
Continuing emphasis on our purpose, consumer centric products to cater to emerging needs, aggressive focus on cost management and cash conservation, accompanied by constant partnering with our strong network of stakeholders have been key in overcoming the current challenging business environment and make best use of the opportunities presented.
Q: How do you foresee the growth of your company going forward? Are there any specific opportunities or initiatives you are exploring and would like to share with the investing public?
A: As indicated in our recent Annual Report, growth would be driven by focusing on strengthening the core portfolio whilst continuing to drive efficiencies and leveraging on digital platforms and capabilities.
The Group will invest in building a strong, sustainable portfolio of Consumer Brands and Healthcare products and also focus on re-energizing innovation and internationalization, where we develop and design products for local and international markets while investing in future-oriented adjacencies that leverage our core strengths.
Q: The CSE has relaxed the regulatory framework to facilitate more listings. Would you like to comment on it?
A: This relaxation has enabled opportunities for the SME sector to enter CSE. The digitization initiatives have also proven to be useful especially in the current environment. More knowledge sharing to ease hurdles mentioned will make this attempt more fruitful.
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