Sri Lankaâ€™s Hemas Holdings sells N*able IT unit for Rs450mn
ECONOMYNEXT – Sri Lanka’s Hemas Holdings said it has sold an information technology unit, N*able (Pvt) Ltd., held by a subsidiary, for 450 million rupees.
“In line with our strategy of focusing on our core businesses, in early Q2, we concluded the sale of our stake in N*able, our technology services business,” Hemas Holdings said in a note to the accounts.
Chief Executive Peter D’ Almeida said the transaction gave N*able enterprise value of 1.467 billion rupees, which was 10 times earnings. Hemas was paid 450 million rupees for the equity.
Hemas had originally invested only 30 million rupees indicating a return of 15 times, he said.
"This is a reflection of the enormous value we have created and captured over 11 years of hard work in the dynamic information technology business," D’ Almeida said.
N*able made a net loss of 163.6 million rupees in the June 2019 quarter, according to Hemas interim accounts filed with the stock exchange.
D’ Ameida said the N"able usually posted a loss in the first quarter, due to the way expenses were charged and revenue was recognized on contracts based on milestones.
The firm had ended the 2018/2019 financial year with 141 million rupees of profits though there was a 108 million rupee loss recorded in the first quarter.
In the previous year when the company made 159 million in profits, there was only a 2 million rupee profit in the first quarter.
Vishwa BPO (Private) Limited, a subsidiary of Hemas Holdings PLC, divested its 100 percent stake in N*able on 12 July 2019.
Following the sale of the IT firm, Hemas said it will recognize a loss of 114 million rupees in its books.
The carrying value of an investment increases over time due to accumulated profits being added to the investment value, and recognized in consolidated profits, though the original investment may have been much lower.
(COLOMBO, 09 August, 2019 – This story was updated and recast with comments from Chief Executive Peter’ D Almeida on the valuation and the historical pattern of revenue/profit recognition of the firm.)