Lankem Developments PLC’s rights Issue oversubscribed, raises Rs. 752.5Mn

Lankem Developments PLC has announced the oversubscription of its recent rights issue, securing Rs. 752.56 million from investors against an initial target of Rs. 600 million, according to market disclosure filed with Colombo Stock Exchange (CSE) this week.

The rights issue, approved at an Extraordinary General Meeting on March 14, 2025, offered 40 million new ordinary shares at Rs. 15 per share which was a discount to its February 2025 market price of Rs. 22. Shareholders were entitled to one new share for every three existing shares held.

 Proceeds from the issue are earmarked to settle Rs. 477.87 million in related-party debts, invest Rs. 116.87 million in subsidiary Agarapatana Plantations PLC, and allocate Rs. 5.25 million for working capital.  

The oversubscription reflects strong demand, with total subscriptions reaching Rs. 752.56 million, inclusive of applications for additional shares. Lankem emphasized that the final allotment remains subject to cheque clearance, bank confirmations, and verification processes.  

Settling intercompany debts is expected to reduce interest costs linked to loans carrying rates of AWPLR + 2 percent, potentially improving profitability. The subsidiary investment aims to boost Lankem’s stake in Agarapatana Plantations PLC, which reported a pre-tax profit of Rs. 925.5 million for 2024. Agarapatana is currently expanding mechanization and renewable energy projects to counter labor shortages.  
 
Pre-rights issue, Lankem faced a working capital deficit of Rs. 507.9 million. Post-issue, this deficit is projected to narrow to Rs. 24.8 million, bolstering liquidity. Major shareholder Consolidated Tea Plantations Ltd (47.57 percent stake) reaffirmed its commitment to subscribe, ensuring retained control.  

The company, transitioning to an investment holding firm since 2012, has not declared dividends in the past three fiscal years. However, debt reduction and subsidiary growth could pave the way for future shareholder returns.  

Unsubscribed shares will be allocated to applicants seeking additional shares, with oversubscribed portions distributed pro-rata. Funds will be deployed within 60 days, pending market conditions. 

Analysts view the oversubscription as a vote of confidence in Lankem’s strategic pivot and its subsidiary’s performance.