Raigam sees salty potential, announces Initial Public Offering

The Kingdom of Raigam has come forward to explore the Sri Lankan salt industry (run as an oligopoly), announcing an Initial Public Offering (IPO) of 80mn ordinary voting shares worth Rs 200mn at Rs 2.50 per share through its subsidiary company Raigam Wayamba Salterns Ltd, beginning March 23.

The company intends to raise funds through this offering, to finance capital expenditure requirements for the development of Salterns and upgrading of salt refineries at a cost of Rs 200mn.

Looking at the demand and supply, statistics reveal that the demand (for human consumption) for salt is 120, 000mt (metric ton) per annum and for industrial usage, Sri Lanka needs 30, 000mt. But the capacity of active salterns stands at 150, 000mt and the actual average production is 110,000 and the national buffer stocks stands at zero (0).

At present, 70% of the raw salt required for refinery is purchased from outsiders, and with the implementation of purposed development activities, the company will be able to be self-sufficient in terms of raw materials, which will help further increase profitability. At present, the local salt supply from all available sources in Sri Lanka is not sufficient to meet the demand and no buffer stock remains at local Salterns. The deficit is imported from countries like India, becoming a burden of approximately USD 4.0bn per annum to our foreign resources.

A State-of-the art modern Salt refinery and a table salt manufacturing plant at Palavi, Puttalam and a mini Saltern of 92 acres are about to be completed.

As the Board of Investment (BoI) Sri Lanka has granted tax exemptions under the “Three hundred factories Programme”, investors can expect tax- free results from the company during the tax holiday period, it was revealed.

According to Kingdom of Raigam key financial indicators, the company’s 2008/09 turnover has been Rs 382, 619, 000 compared to 2007/09 figure of Rs 157, 973, 000. The equity stands at Rs 387, 973, 000 in 2008/09 compared to 2007/08 which stood at Rs 215, 918, 000. The indicator also revealed that profit-before-tax in the year 2008/09 is Rs 172, 054, 000 compared to previous year Rs 12, 547, 000.

Raigam says there is great potential in the salt market with an inelastic demand and a vacuum in the supply.