SME Stock – Chrissworld to be Listed on CSE Empower Board
CHRISSWORLD LTD Q & A
The Colombo Stock Exchange (CSE) has approved, an application submitted by Chrissworld Limited, for the listing of its Ordinary Voting Shares by way of an offer for subscription and Initial Public Offering (IPO) is due to be opened on 27th April 2021. This is a distinct IPO as it is the first company to be listed on the Empower Board of the CSE.
Please tell us something about Chrissworld Ltd. Its role and journey since initiation?
Becoming a Public Listed Company was never a consideration when Chrissworld was incorporated in 2013, but we were absolutely confident that focusing our energies to develop the Company’s core business of warehousing, was going to put us right there with the big boys. Our growth has been primarily centered on our confidence and belief in ourselves, that we can deliver positive results, whatever the challenges. We started off with a 30,000 sq ft warehouse with zero cargo volumes and not a single client commitment. Within a couple of months, we were at maximum capacity and it’s been in growth mode ever since.
Nature almost had us wiped off in 2016 with major flooding in Colombo destroying our entire capacity of 100,000 sq ft resulting in the loss of all our clients, but with our resolve and determination to survive, coupled with a great team effort by our people, we raised ourselves from the depths to develop the Company to where it is today, with a strong customer base spread across 500,000 sq ft of warehousing in 13 locations.
What were the main reasons behind the decision to list on the CSE?
Firstly, the opportunity given for SME’s to list was an attraction, whereas previously only the large-scale enterprises were considered for listing. Though most SME’s will still shy away from listing, due to various reasons, we thought of taking up the challenge, since it was a super opportunity to create a positive image of the Company in the industry. Seeing the tremendous potential in this business, it was important to project ourselves as a stable and professional company to give us an advantage to win the confidence of future clients.
Secondly, logistics is a capital-intensive business and fast growth requires capital in hand to ensure every opportunity to develop is not missed out. We have had instances where our clients have requested for additional warehouses at short notice. It is a request we should not refuse. Divesting a part of the shareholding to the public is an opportunity to raise required capital in the form of equity than borrowing from banks and other financial institutions.
Thirdly, it gives us satisfaction that we have contributed in at least a small way to increase activity in the stock market and that society could reap results from our success.
Last but not least, after having understood the control and monitoring mechanisms involved in a listed Company, we felt it was necessary for us to take our Company in the path of good governance, which would also lay the foundation for us to go for bigger plans in later years.
Do you believe the tax relaxations provided by the government were attractive to take the decision to be listed?
This was not a factor for our decision. However, we appreciate the benefit and accept it with open arms. We are surprised that the newly listed SME’s are given a 50% tax benefit only in the 1st year and the current applicable tax rate of 14% is reverted to thereafter, whereas the larger categories are to enjoy a tax rate of 14% for a full 3-year period. Therefore, the tax benefit in its current context is not a real attraction which prompted us to list.
We are hopeful that the capital market regulators and policymakers would correct this situation in the upcoming budget so that SMEs would also gain the benefit of tax incentives when a listing is obtained in the CSE.
As the first Empower Board Listing, could you share your experience in the listing process?
As reiterated before, obtaining a listing in the CSE was never in our agenda until we were approached by Atarah Capital Partners, an approved “Sponsor” firm of the Colombo Stock Exchange. They are the Managers to the IPO of the upcoming listing.
The decision to list was only taken in October 2020, however we commenced engagement with Atarah Capital Partners way back in 2019 and deserves credit to them for offering the right advice on certain restructuring initiatives to strengthen our Balance Sheet, and also certain measures to improve corporate governance.
The demands of the listing process were never a hindrance to us since Atarah Capital Partners with extensive capital market industry and Regulatory experience was able to successfully handle the listing application process, obtain regulatory approvals from both SEC and CSE and also prepare a Prospectus and a Research Report for us.
Who will be the Registers to the issues?
The Registrars to the Issue is Central Depository Systems (Pvt) Ltd, widely known as CDS. They were recommended to us by Atarah Capital Partners and we are confident that CDS would carry out the relevant tasks successfully.
On par with the listing process, did the company require to make changes to the present organizational structure?
Yes, there was a slight structural change, but it was limited only to the Board of Directors. We had to bring in 2 Independent Directors to meet the regulatory requirements as a listed Company. We also appointed Mr Suraj Suraweera, who is a part of our pioneering team, as the Chief Executive Officer/Managing Director, and who is probably one of the best in the industry.
Having said that, Chrissworld even as a private Company has always been run professionally and with a lot of discipline. Our career beginnings in listed Companies have tattooed disciplined management in us and taught us the importance of being fully focused on this. Thus, it is not a major shift in policy or style of management for us.
However, we will always be cautious in our forward journey. Many private companies have gone bankrupt due to the Directors and shareholders amassing individual wealth and extravagant lifestyles, at the expense of the Company. Similarly, even listed Companies run into disaster due to high risk initiatives and ill planned expansion. We wish to tread carefully and ensure long term sustainability and steady returns for our shareholders.
What are the Company’s plans for growth and expansion in terms of projects and initiations, with the funds that Chrissworld Ltd will be attracting from the Stock Market?
The prospectus provides in detail on how the IPO funds will be utilized. The main focus would be to upgrade our facilities and services by introducing new racking, new material handling equipment and add a warehouse Management System. These measures will bring very positive results in business growth.
On paper, we are not showing fancy results, since we firmly believe in the principal of Under Promise & Over Deliver. In fact, we are forecasting single digit growth rates over the next couple of years, which is still a good forecast, but we are extremely confident that we will achieve far beyond our targets.
We will strive to expand our verticals and introduce several new revenue streams in the future, whilst we look at how to make use of technology to support all our plans. Our aim is to take this Company to a Billion Rupee top line as a first step and be acknowledged as a world class service provider with a distinct style. We are a different Company indeed. Our culture, our flexibility, our hands-on involvement and our intense desire to serve our clients well, all this with not much fan fare and publicity, has been our distinct features and has worked well for us thus far.
What is your Message to other Small and Medium-sized Enterprises (SME) who are anticipating to list on the Sri Lankan Stock Market?
Be fearless and take the challenge to make use of this opportunity of listing in the CSE and use the alternative source of raising equity capital for your company via channeling savings of the general public. Debt Capital via Banks and Finance companies should not be the only source of capital for your businesses.
The thousands of calls and messages we continue to receive from all over the world appreciating our decision is a testimony of how others perceive this move. It is an opportunity to take your brand to a different level and to raise the bar of management. If your current internal controls are disciplined and you have proper financial management in place, this is not a huge challenge whatsoever.