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Dec 07, 2012 (LBO) - Sri Lanka's Softlogic group may look for foreign private equity to further develop its retail business this year ahead of a public listing , chairman Ashok Pathirage said.
Softlogic Holdings, which has interests in information technology, retailing, healthcare and financial services raised money last year from a domestic private placement and initial public offer by subscription. But its stock flopped on debut.

"Most probably this year we might look at private equity but we will not think of Sri Lanka," Softlogic chairman Ashok Pathirage told the LBR-LBO CEO forum, a gathering of senior executive, in Colombo.

"We have burnt our fingers with having the Softlogic IPO, with the guys who bought in the private placement selling out on the first day, just to make money.

"We do not like to have those kind of investors with us. So most probably we will look at outside."

Pathirage said Softlogic's healthcare arm, through Asiri Hospitals was already largely listed and so was its financial services units.

Pathirage, who started out in information technology after leaving Sri Lanka's John Keells Holdings with eight others when he was 27 became well known for retailing popular brands such as Nokia. It later acquired franchises for Panasonic and Samsung.

Branded Products

He said branded products will have a big potential with the government targeting 4,000 dollars per capita income by 2016.

Sri Lanka's current administration committed to a strong exchange rate and lower inflation ending decades of currency depreciation and high inflation.

Currency depreciation which was institutionalized as a policy by so-called 'New Dealers' of the administration of President Franklin Roosevelt in the US, is the principle tool through which rulers and the state can impoverish citizens.

Under the post World War II Bretton Woods system, so-called 'soft dollar pegged' central banks were set up around the world which targeted the exchange rate and interest rate at the same time, generating 'foreign exchange shortages' and balance of payments crises.

When contradictory policy pushes Sri Lanka into a balance of payments crisis, rulers and bureaucrats slap taxes on what are everyday consumer goods in other countries, deviously claiming that they are 'luxury goods', which analysts say is a risk to business.

Policy has improved in recent years, though the dollar peg is again under pressure due to delay in raising interest rates in 2011.

"If we achieve this 4,000 dollar per capital income by 2016, we believe that there will be a lifestyle change," Pathirage said.

"People will aspire to own branded and quality products,"

He said people will move up from standard mobile phones to smart phones and from motor cycles to cars.

He said Softlogic had also got the franchises for Nike, Levi's and the Mango store.

In this year's budget the state cut taxes for branded shoes, though nationalist industrialists still have a tight protectionist grip on footware used by poorer people.

Shopping Mall

Pathirage said Softlogic also had also signed up the UK based department store Debenhams.

The first Debenhams store will be around 20,000 to 30,000 square feet and may open next year, he said.

"It will be the first international department store if it works out," he said. "We are at the moment looking for retail space because that is one of the constraints we are facing today."

He said large shopping mall developments that are now being planned will help the sector. Several integrated hotel, retail and apartment projects are being planned in Colombo with the onset of a tourism boom.

"With the brands and products we have, we can easily occupy 150,000 to 200,000 square feet space in any new mall that is coming up."

"Basically our growth is going to come from there. In ICT we do not expect much growth."

He said while ICT may grow at 15 percent, about 100 percent annual growth is expected in retail.

Pathirage said the group had 110 electronic stores and the chain will grow to 250 by the year end.

"With 250 stores basically we are going to match the top two guys. That is Singer and Abans. Singer could possibly end up this year with 20 billion rupees plus turnover.

""Our idea is after having 200 outlets in 2014 we will most probably look at 20 billion plus from the retail side, only from consumer electronics."