Hemas to ask shareholders more time to utilize rights issue money

Diversified conglomerate, Hemas Holdings PLC, will be asking its shareholders for an extension of up to two and a half years to utilize the Rs.4.1 billion it raised through a rights issue in 2015, a disclosure to the Colombo Stock Exchange (CSE) stated.
A resolution to utilize the funds by March 31, 2019, will be brought in during an extraordinary general meeting, which will be held immediately after Hemas’ annual general meeting on June 30, 2017.
The firm raised the funds from its shareholder in April 2015 to expand its healthcare and personal care businesses.
Hemas stated that the funds were supposed to be disbursed within the same financial year it raised the capital. The firm had over the past two years not requested its shareholders for an extension, and the group balance sheet indicated that the funds remaining dormant either as cash or short-term deposits.

Hemas said several investment opportunities were considered, but none were attractive, raising the question of whether public funds were collected without a proper investment project.
CSE and Securities and Exchange Commission (SEC) officials said that they were not aware of Hemas not utilizing the funds until Mirror Business brought it to their attention earlier this year.
The latest Hemas financial statements for the quarter ended March 31, 2017, finally made a statement that the funds were placed in investment-grade short-term instruments.
The Securities and Exchange Commission has brought in a circular directing all funds raised through the bourse to be utilized within a specific timeframe for a specific stated intent, after one firm misused funds raised through an initial public offering by placing them in securities for interest income for 3-and-a-half years.
However, regulations enforcing such a timeframe and fund utilization were not in effect when Hemas went for the rights issue, making Hemas the only outlier which has raised public funds without a stern regulatory direction to utilize them, unless compelled by the shareholders.
The majority of shares in the firm are controlled by the Esufally family.
Meanwhile, Hemas subsidiary J. L. Morison is seeking approval to take a Rs.1.4 billion loan from its parent for the construction of a new pharmaceutical manufacturing facility within the SLINTEC Nano Technology Park in Homagama, which will require an investment of over Rs.2 billion.