Ruhunu Putra Energy Group of Companies Overview
PRE-SEEN IN A
NUT SHELL – JUNE 2016
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Case of Ruhunu Putra Energy Group of Companies
By Trevin Hannibal
1
Company profile
•
Name :Ruhunu Putra Energy PLC (RPE)
•
Chairman/CEO : Mr. Sanath Jayamuni
•
RPE operates in the following sectors:
•
Auto air conditioning
•
Energy
•
Supermarkets
•
Tea
•
Manufacturing
•
Leisure
By Trevin Hannibal
2
Background
•
Initially started with Ruhunu Putra Auto Air Conditioning
(Pvt)
•
Has branches in Galle, Matara, Kurunegala, Kaluthara and
Kandy
•
Ruhunu Putra Energy (Pvt) was established in order to enter
in to the auto gas industry:
•
Converting vehicles into gas
•
Importing LP Gas
•
Ruhunu Putra Energy (RPE) was listed on the Colombo
Stock Exchange (CSE) in 2009
By Trevin Hannibal
3
V
i
s
i
o
n
o
f
R
P
E
•
To be the most preferred and trusted Sri Lankan
multinational that touches the day-to-day lives of
people in Sri Lanka and beyond, through a
diverse group of companies
.
By Trevin Hannibal
4
M
i
s
s
i
o
n
o
f
R
P
E
•
Serve the rural community, customers and all other
stakeholders with love, through our core business – gas
and petroleum, and build a diversified business
conglomerate, based on the four main principles of:
•
Reducing cost of living
•
Enhancing youth skills
•
Bridging regional disparity
•
Enhancing local and global markets
By Trevin Hannibal
5
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By Trevin Hannibal
6
Similar to LAUGFS Holdings*
By Trevin Hannibal
7
R
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P
L
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(
R
P
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)
•
Incorporated in 2002 & Listed on the CSE in 2009
•
Predominantly in the petroleum and gas retailing industry,
pioneering the state of the art filling station concept in Sri
Lanka.
By Trevin Hannibal
8
Customer facilities at RPE
•
Nitrogen air, digital air, lubricants, domestic gas cylinders
•
Car care items under a 24 hour service
By Trevin Hannibal
9
Customer facilities at RPE
•
The 2141 Dialog SMS facility and direct dialing customer
suggestion phone facilities are available
•
Customers could contact the management for their
requirements or any significant inquiries
By Trevin Hannibal
10
10
Staff @ RPE
•
Currently there are more than 500 employees working at
RPE’s head office and filling stations
•
RPE also provides adequate training, encourages staff
development and provides opportunities for growth
By Trevin Hannibal
11
11
Distribution channel of RPE
•
3,000 dealers and 20 distributors working across the
country.
•
RPE delivers customised LP gas solutions that serve
commercial, industrial and domestic requirements.
•
Opened up a new filling station at the Hambanthota
harbour, which fulfills the fuel needs of the fisheries
sector.
By Trevin Hannibal
12
12
Issues @ RPE
•
Issues in share price
•
Fluctuating @ Rs. 80 - 85 during the last 6 months, which is lower
than the net assets value of the group.
•
The sharp drop in crude oil price has exerted downward
pressure on LP gas and Ruhunu Putra passed on the
benefits to customers in 2015.
•
Even though there are only a few players in the market,
the bulk market is severely affected by competition. The
company may need more effective strategies to maintain
the exiting market dynamics.
By Trevin Hannibal
13
13
Issues @ RPE
•
Parking lot of the existing office premises was not
sufficient and the company entered into a rent agreement
for Rs. 25,000 per month.
•
Further RPE has given their own building in Wattala to
Ruhunu Putra Tea Export (Pvt) Limited to be used for
blending tea and carrying out the packaging of export
orders.
By Trevin Hannibal
14
14
R
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h
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m
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s
(
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)
L
i
m
i
t
e
d
(
R
P
S
)
•
Established in 2006
•
RPE holds 80% of RPS’s stated capital & 20% by John
and Sarath.
By Trevin Hannibal
15
15
Customer facilities
•
Opening hours of the supermarket outlets till 11 pm
•
A convenience store was jointly operated with the fuel
retail outlets along with a 24 hour pharmacy.
•
Most diverse and largest product range in terms of Stock
Keeping Units (SKUs), housing up to 26,000 per store
By Trevin Hannibal
16
16
Vision of RPS
•
“our main concern should be our customers. We
target not only individual retail customers but also
the customers who purchase in bulk. Our plan is
to have 40 outlets and over 30,000 regular
customers per month”
By Trevin Hannibal
17
17
Issues at RPS
•
RPS has not reached targets in terms of customer
service, profitability, supply chain and working capital
management.
•
25 outlets were opened and less than 12,000 customers
are visiting the outlets each month.
•
RPS has not gone to outstation cities other than the main
ones.
•
Transaction cost per customer is higher than that of our
competitors
By Trevin Hannibal
18
18
Remedial actions
•
RPS needs to rethink their strategy in designing
supermarkets as well as in selecting locations.
•
Hence a new investment to open 15 new outlets outside
the Colombo district is taken into consideration.
By Trevin Hannibal
19
19
Possible scenarios*
•
The current proposal might be requested for a review in
order to expand the number of outlets
•
A project appraisal is likely to be tested
•
A restructuring of the operations are also possible
By Trevin Hannibal
20
20
R
u
h
u
n
u
P
u
t
r
a
T
e
a
E
x
p
o
r
t
(
P
v
t
)
L
i
m
i
t
e
d
(
R
P
T
)
•
Ruhunu Putra Tea Export (Pvt) Limited (RPT) was
incorporated 2002
•
In 2010 RPE invested 100% of the capital required for
expansion
•
It now holds 75% of the share capital of RPT.
By Trevin Hannibal
21
21
Issues at RPT
•
The cost of manufacturing tea bags is now increasing due
to the current crisis in tea industry
•
RPT specialises in low country tea blending and their
markets request only those blends
•
Most of the small tea growers have now stopped plucking
tea leaves and there is a shortage of tea leaves for
production
•
For the first time RPT incurred a loss in year 2015/16.
By Trevin Hannibal
22
22
Possible scenarios*
•
Since RPT’s performance is not lucrative, the company
might maintain the existing plantation and use another
crop such as rubber/cinnamon etc.
•
Since it is low country another product can be grown
instead of tea which is not an option in up-country due to
the climate and temperature.
By Trevin Hannibal
23
23
R
u
h
u
n
u
P
u
t
r
a
L
e
i
s
u
r
e
(
P
v
t
)
L
i
m
i
t
e
d
(
R
P
L
)
•
Established in 2013 with a stated capital of Rs. 853 million
•
RPE holds 80% of the stated capital & Sanath and his
friend saparamadu holds the remaining stake equally
•
In 2014 RPL launched its first luxury resort, Ruhunu
Resort & Spa – Negombo-
•
consists of 100 luxury rooms
•
RPE has invested a further Rs. 617.6 million in the resort.
By Trevin Hannibal
24
24
Future initiatives of RPL
•
A feasibility study is now being carried out for a massive
250-room resort in Aluthgama.
•
Once completed, the Aluthgama resort would be the
group’s largest development in the tourism sector.
By Trevin Hannibal
25
25
Future initiatives of RPL
•
Its aim is to be the number one tourist destination in the
island with incomparable magnitude and quality.
•
RPE has given a loan of Rs. 75 million, payable in 5 years
at an interest rate of 5% p.a., to fund the new projects in
the pipeline
By Trevin Hannibal
26
26
Possible scenarios*
•
Since the new project requires a funding of Rs.75 million,
a financing question is probable which would test your
knowledge on
•
Capital structure
•
Equity and debt financing etc.
•
Since RPE is offering this loan, it might be given at a
subsidized rate.
•
Hence APV calculations are probable
By Trevin Hannibal
27
27
R
u
h
u
n
u
P
u
t
r
a
G
r
o
u
p
-
f
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s
t
r
a
t
e
g
i
e
s
a
n
d
i
m
p
a
c
t
s
•
The group started a small plastic manufacturing plant in 2009.
•
Has entered into an agreement with CPC to buy naphtha
(feedstock), the main raw material needed to produce plastic.
•
The company uses plastic injection molding in which it offers
products such as
•
Electronic housings
•
Containers
•
Bottle caps
•
Automotive interiors
•
Combs
•
Brand name- Ruhunu Petro
By Trevin Hannibal
28
28
Main concerns of the group
•
More focus to be given for Ruhunu Putra Auto Air Conditioning
(Pvt) Limited
•
“Current environment is good for new investments in this
industry in Sri Lanka and as such we should plan our next
investment in this industry” – Sanath
•
“We should invest in this industry via RPE, and amalgamate
both Ruhunu Putra Auto Air Conditioning (Pvt) Limited and
Cooling Air (Pvt) Limited”. – Sanath
•
Cooling Air (Pvt) Limited, one of the leading air condition
installers and service providers for apartments in Sri Lanka.
By Trevin Hannibal
29
29
Main concerns of the group
•
The importance of recruiting an expert to study the
existing ERP system of the group.
•
The group finance director had sent a memo with his
concerns suggesting to close down RPT and re-invest in
the supermarket sector.
By Trevin Hannibal
30
30
Main concerns of the group
•
He had also suggested that one of the initial departments
in the group that converted vehicles into gas, which is
now incurring losses due to declining business in the auto
gas industry, should be closed down too.
•
Monika(head of the group’s strategic business
development unit) also suggested that they should look
for a viable merger or acquisition relating to the tea
industry to experience fast growth.
By Trevin Hannibal
31
31
Possible scenarios*
•
A business valuation is highly probable in the context of a
merger with Cooling Air (Pvt) Limited, if the board of
directors would initiate the thought of Mr.Sanath
•
Monikas suggestion of a viable merger or acquisition
relating to the tea industry to experience fast growth is
also a plausible scenario to be considered.
By Trevin Hannibal
32
32
Group structure
By Trevin Hannibal
33
33
Notes of the pre-seen
•
The remaining notes of the pre-seen are on the financial
statements of the group
•
A ratio analysis of the financial statement attached in the
pre-seen could be initiated for a on the surface study.
•
The unseen might comprise of question which needs the
financial statements of the pre-seen as a reference
•
Eg: Income statement forecast/ cash flow forecast etc.
•
The purpose of the unseen in to provide a better
understanding on the industry in which your 50 mark
question will be based upon.
By Trevin Hannibal
34
34
Ruhunu Putra Energy Group of Companies, led by Chairman/CEO Mr. Sanath Jayamuni, operates in auto air conditioning, energy, supermarkets, tea manufacturing, and leisure sectors. Established in 2002 and listed on the Colombo Stock Exchange in 2009, RPE aims to be a trusted Sri Lankan multinational impacting lives locally and globally. The group's vision is to be the most preferred, while its mission focuses on serving communities through gas and petroleum, with core principles of cost reduction, skill enhancement, regional unity, and market growth.
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Presentation Transcript
1 By Trevin Hannibal PRE-SEEN IN A NUT SHELL JUNE 2016 By Trevin Hannibal (CIMA Passed Finalist, Pg.Dip.BA, MBA (Cardiff Metropolitan University) Case of Ruhunu Putra Energy Group of Companies
2 By Trevin Hannibal Company profile Name :Ruhunu Putra Energy PLC (RPE) Chairman/CEO : Mr. Sanath Jayamuni RPE operates in the following sectors: Auto air conditioning Energy Supermarkets Tea Manufacturing Leisure
3 By Trevin Hannibal Background Initially started with Ruhunu Putra Auto Air Conditioning (Pvt) Has branches in Galle, Matara, Kurunegala, Kaluthara and Kandy Ruhunu Putra Energy (Pvt) was established in order to enter in to the auto gas industry: Converting vehicles into gas Importing LP Gas Ruhunu Putra Energy (RPE) was listed on the Colombo Stock Exchange (CSE) in 2009
4 By Trevin Hannibal Vision of RPE To be the most preferred and trusted Sri Lankan multinational that touches the day-to-day lives of people in Sri Lanka and beyond, through a diverse group of companies.
5 By Trevin Hannibal Mission of RPE Serve the rural community, customers and all other stakeholders with love, through our core business gas and petroleum, and build a diversified business conglomerate, based on the four main principles of: Reducing cost of living Enhancing youth skills Bridging regional disparity Enhancing local and global markets
6 By Trevin Hannibal Structure of the Group Comprises of: 1. Ruhunu Putra Energy PLC (RPE) 2. Ruhunu Putra Supermarkets (Pvt) Limited (RPS) 3. Ruhunu Putra Tea Export (Pvt) Limited (RPT) 4. Ruhunu Putra Leisure (Pvt) Limited (RPL)
7 By Trevin Hannibal Similar to LAUGFS Holdings*
8 By Trevin Hannibal Ruhunu Putra Energy PLC (RPE) Incorporated in 2002 & Listed on the CSE in 2009 Predominantly in the petroleum and gas retailing industry, pioneering the state of the art filling station concept in Sri Lanka.
9 By Trevin Hannibal Customer facilities at RPE Nitrogen air, digital air, lubricants, domestic gas cylinders Car care items under a 24 hour service
10 By Trevin Hannibal Customer facilities at RPE The 2141 Dialog SMS facility and direct dialing customer suggestion phone facilities are available Customers could contact the management for their requirements or any significant inquiries
11 By Trevin Hannibal Staff @ RPE Currently there are more than 500 employees working at RPE s head office and filling stations RPE also provides adequate training, encourages staff development and provides opportunities for growth
12 By Trevin Hannibal Distribution channel of RPE 3,000 dealers and 20 distributors working across the country. RPE delivers customised LP gas solutions that serve commercial, industrial and domestic requirements. Opened up a new filling station at the Hambanthota harbour, which fulfills the fuel needs of the fisheries sector.
13 By Trevin Hannibal Issues @ RPE Issues in share price Fluctuating @ Rs. 80 - 85 during the last 6 months, which is lower than the net assets value of the group. The sharp drop in crude oil price has exerted downward pressure on LP gas and Ruhunu Putra passed on the benefits to customers in 2015. Even though there are only a few players in the market, the bulk market is severely affected by competition. The company may need more effective strategies to maintain the exiting market dynamics.
14 By Trevin Hannibal Issues @ RPE Parking lot of the existing office premises was not sufficient and the company entered into a rent agreement for Rs. 25,000 per month. Further RPE has given their own building in Wattala to Ruhunu Putra Tea Export (Pvt) Limited to be used for blending tea and carrying out the packaging of export orders.
15 By Trevin Hannibal Ruhunu Putra Supermarkets (Pvt) Limited (RPS) Established in 2006 RPE holds 80% of RPS s stated capital & 20% by John and Sarath.
16 By Trevin Hannibal Customer facilities Opening hours of the supermarket outlets till 11 pm A convenience store was jointly operated with the fuel retail outlets along with a 24 hour pharmacy. Most diverse and largest product range in terms of Stock Keeping Units (SKUs), housing up to 26,000 per store
17 By Trevin Hannibal Vision of RPS our main concern should be our customers. We target not only individual retail customers but also the customers who purchase in bulk. Our plan is to have 40 outlets and over 30,000 regular customers per month
18 By Trevin Hannibal Issues at RPS RPS has not reached targets in terms of customer service, profitability, supply chain and working capital management. 25 outlets were opened and less than 12,000 customers are visiting the outlets each month. RPS has not gone to outstation cities other than the main ones. Transaction cost per customer is higher than that of our competitors
19 By Trevin Hannibal Remedial actions RPS needs to rethink their strategy in designing supermarkets as well as in selecting locations. Hence a new investment to open 15 new outlets outside the Colombo district is taken into consideration.
20 By Trevin Hannibal Possible scenarios* The current proposal might be requested for a review in order to expand the number of outlets A project appraisal is likely to be tested A restructuring of the operations are also possible
21 By Trevin Hannibal Ruhunu Putra Tea Export (Pvt) Limited (RPT) Ruhunu Putra Tea Export (Pvt) Limited (RPT) was incorporated 2002 In 2010 RPE invested 100% of the capital required for expansion It now holds 75% of the share capital of RPT.
22 By Trevin Hannibal Issues at RPT The cost of manufacturing tea bags is now increasing due to the current crisis in tea industry RPT specialises in low country tea blending and their markets request only those blends Most of the small tea growers have now stopped plucking tea leaves and there is a shortage of tea leaves for production For the first time RPT incurred a loss in year 2015/16.
23 By Trevin Hannibal Possible scenarios* Since RPT s performance is not lucrative, the company might maintain the existing plantation and use another crop such as rubber/cinnamon etc. Since it is low country another product can be grown instead of tea which is not an option in up-country due to the climate and temperature.
24 By Trevin Hannibal Ruhunu Putra Leisure (Pvt) Limited (RPL) Established in 2013 with a stated capital of Rs. 853 million RPE holds 80% of the stated capital & Sanath and his friend saparamadu holds the remaining stake equally In 2014 RPL launched its first luxury resort, Ruhunu Resort & Spa Negombo- consists of 100 luxury rooms RPE has invested a further Rs. 617.6 million in the resort.
25 By Trevin Hannibal Future initiatives of RPL A feasibility study is now being carried out for a massive 250-room resort in Aluthgama. Once completed, the Aluthgama resort would be the group s largest development in the tourism sector.
26 By Trevin Hannibal Future initiatives of RPL Its aim is to be the number one tourist destination in the island with incomparable magnitude and quality. RPE has given a loan of Rs. 75 million, payable in 5 years at an interest rate of 5% p.a., to fund the new projects in the pipeline
27 By Trevin Hannibal Possible scenarios* Since the new project requires a funding of Rs.75 million, a financing question is probable which would test your knowledge on Capital structure Equity and debt financing etc. Since RPE is offering this loan, it might be given at a subsidized rate. Hence APV calculations are probable
28 By Trevin Hannibal Ruhunu Putra Group - future strategies and impacts The group started a small plastic manufacturing plant in 2009. Has entered into an agreement with CPC to buy naphtha (feedstock), the main raw material needed to produce plastic. The company uses plastic injection molding in which it offers products such as Electronic housings Containers Bottle caps Automotive interiors Combs Brand name- Ruhunu Petro
29 By Trevin Hannibal Main concerns of the group More focus to be given for Ruhunu Putra Auto Air Conditioning (Pvt) Limited Current environment is good for new investments in this industry in Sri Lanka and as such we should plan our next investment in this industry Sanath We should invest in this industry via RPE, and amalgamate both Ruhunu Putra Auto Air Conditioning (Pvt) Limited and Cooling Air (Pvt) Limited . Sanath Cooling Air (Pvt) Limited, one of the leading air condition installers and service providers for apartments in Sri Lanka.
30 By Trevin Hannibal Main concerns of the group The importance of recruiting an expert to study the existing ERP system of the group. The group finance director had sent a memo with his concerns suggesting to close down RPT and re-invest in the supermarket sector.
31 By Trevin Hannibal Main concerns of the group He had also suggested that one of the initial departments in the group that converted vehicles into gas, which is now incurring losses due to declining business in the auto gas industry, should be closed down too. Monika(head of the group s strategic business development unit) also suggested that they should look for a viable merger or acquisition relating to the tea industry to experience fast growth.
32 By Trevin Hannibal Possible scenarios* A business valuation is highly probable in the context of a merger with Cooling Air (Pvt) Limited, if the board of directors would initiate the thought of Mr.Sanath Monikas suggestion of a viable merger or acquisition relating to the tea industry to experience fast growth is also a plausible scenario to be considered.
33 By Trevin Hannibal Group structure Ruhunu Putra Energy PLC (RPE) % 80 75 88 Ruhunu Putra Group Structure Minority % 20 25 12 Ruhunu Putra Supermarkets (Pvt) Limited Ruhunu Putra Tea Export (Pvt) Limited Ruhunu Putra Leisure (Pvt) Limited
34 By Trevin Hannibal Notes of the pre-seen The remaining notes of the pre-seen are on the financial statements of the group A ratio analysis of the financial statement attached in the pre-seen could be initiated for a on the surface study. The unseen might comprise of question which needs the financial statements of the pre-seen as a reference Eg: Income statement forecast/ cash flow forecast etc. The purpose of the unseen in to provide a better understanding on the industry in which your 50 mark question will be based upon.
