Arunika Herath

2025 Saliya samarasinghe Lanka Arogya Foods Ltd 7/30/2025 Lanka Arogya Foods Pvt Ltd Table of Contents EXECUTIVE SUMMARY ........................................................................................................................................ 3 1. COMPANY PROFILE/INVESTOR BACKGROUND .......................................................................................... 4 Key Business Activities: ................................................................................................................................... 4 Historical Performance & Market Position ........................................................................................................ 4 Existing Infrastructure & Production Capacity .................................................................................................. 4 2. FUTURE EXPANSION PLAN .......................................................................................................................... 5 Key Challenges Under Previous Management: ................................................................................................ 5 3. MANAGEMENT & STAFF ................................................................................................................................ 6 4. INDUSTRY AND MARKET POTENTIAL .......................................................................................................... 6 5. FINANCIAL PLAN ............................................................................................................................................ 6 6. PROJECT COST ............................................................................................................................................. 7 7. FINANCIAL FORECAST .................................................................................................................................. 8 Repayment Plan .............................................................................................................................................. 9 8. RISK ANALYSIS & MITIGATION ..................................................................................................................... 9 9. JUSTIFICATION FOR INVESTMENT .............................................................................................................. 9 10. CONCLUSION ................................................................................................................................................. 9 2 Lanka Arogya Foods Pvt Ltd EXECUTIVE SUMMARY Lanka Arogya Foods (Pvt) Ltd is a well-established spice manufacturing company located in the IDB Industrial Estate, Pallekele, with a current monthly turnover of Rs. 5 million. Mr. K. Sujeevakanthan intends to acquire the company, including its land and factory, for Rs. 40 million and expand operations by: • Installing new machinery to enhance production capacity. • Strengthening the sales and marketing team to penetrate new markets. • Increasing monthly sales to Rs. 8 million within six months of takeover. To facilitate this expansion, a bank loan of Rs. 30 million is sought, with the remaining Rs. 10 million being invested as equity Name of the Business : Lanka Arogya Foods ( Pvt) Ltd Registered Address : Unit 11 , IDB Industrial Estate , Pallakele, Sri Lanka Business Location : Unit 11 , IDB Industrial Estate , Pallakele, Sri Lanka Business Registration No. : PV- Date Registered : 19th December 2018 Proprietor/Shareholders/Directors: Raman Yuvaraj (NIC No-V) Main Business Activity : Manufacturing and packing spices 3 Lanka Arogya Foods Pvt Ltd 1. COMPANY PROFILE/INVESTOR BACKGROUND Lanka Arogya Foods (Pvt) Ltd is a well-established spice manufacturing company located in the IDB Industrial Estate, Pallekele, a strategic industrial zone in Sri Lanka. The company specializes in the production, processing, and packaging of high-quality spices for both domestic and potential export markets. Key Business Activities: • Processing and packaging of chili powder, turmeric, curry powders, pepper, goraka paste, Chicken Masala powder and other essential spices. • Supplying bulk spices to local retailers, supermarkets, wholesalers, and food processors. • Undertaking sub contracts for popular brands such as CATCH • Maintaining strict quality control and food safety standards to ensure compliance with local and international regulations. The company has obtained the food safety certifications such as GMP and HACCP. Historical Performance & Market Position • Founded: The company has been in operation for several years, building a strong reputation in the spice industry. • Current Monthly Turnover: Rs. 4 - 5 million, with consistent demand in the local market. • Customer Base: The distribution is done though 2 distributors with in the central province. • Brand Recognition: The "Lanka Arogya" brand is trusted for its quality and affordability in the spice sector. Existing Infrastructure & Production Capacity • Land & Factory: The company owns a fully operational factory (4000 Sq Ft) within the IDB Industrial Estate, (46P land) equipped with basic processing and packaging machinery. • Current Workforce: Employs 9 workers in production, quality control, marketing and administration. 4 Lanka Arogya Foods Pvt Ltd • Production Capacity: Currently processes 3000 Kg of spices per month, with room for expansion. 2. FUTURE EXPANSION PLAN The current owner, Mr. Yuvaraj has decided to sell the business since he is migrating to Newzealand, presenting an opportunity for Mr. K. Sujeevakanthan to take over and expand operations. Mr. K. Sujeevakanthan will continue the business under the same company and there will be a share transfer between directors to change the ownership. Key Challenges Under Previous Management: 1. Limited Machinery: Outdated equipment restricts production efficiency and scalability. 2. Underdeveloped Sales Network: Reliance on existing distributors without aggressive market expansion. 3. Untapped Potential markets: No structured approach to entering to other regions in the country and the international market. Strategic Opportunity for New Ownership Mr. K. Sujeevakanthan, is an ex- banker and a young entrepreneur with experience in diversified businesses. He is currently operating a hardware shop in Balagolla which generate monthly revenue of Rs.15Mn with an average net profit margin of 8%. Also, he is the agent of El Toro ceiling sheets and panels in the area with an average monthly revenue of Rs.15Mn (9% commission). In addition to that he is earning a monthly rent income of Rs.300,000/- from renting out the earth moving machinery. He aims to: • Modernize production by installing advanced and new machines for spice grinding, blending, packaging and Ice cream cones producing machines. • Expand the sales team to penetrate new retail chains, hotels, and other regions in Sri Lanka as well as to the international market. • Introducing new products such as Rasam Powder, Ice cream cones etc • Enhance branding & marketing to compete with leading spice brands in Sri Lanka. • Increase monthly revenue from Rs. 5Mn to Rs. 8Mn within six months of acquisition. Also he is planning to build up a warehouse on the same land to run the operations of the EL – 5 Lanka Arogya Foods Pvt Ltd Toro roofing sheets dealership which will be starting in another 2 months. It will be convenient for him to operate the two business at one location. He is expecting a monthly turnover of Rs.20Mn from the new dealership with a commission of 9%. 3. MANAGEMENT & STAFF The new Managing Director (MD), Mr. K. Sujeevakanthan will overlook the overall operations of the business. He has very good experience and exposure in managing human resources & all other general business functions. Employment opportunities. The current business proposal creates direct employment opportunities for a minimum of 2 persons. Initially the total staff members will be 11. Sales Team 2 4. INDUSTRY AND MARKET POTENTIAL • Sri Lanka’s spice industry has strong domestic demand and global export potential (especially in the Middle East, Europe, and India). • Increasing consumer preference for premium, hygienically packed spices over loose products. • Government support for food processing SMEs through export incentives and low-tax industrial zones. 5. FINANCIAL PLAN Component Total Acquisition Cost Loan Requested Equity Investment Current Monthly Sales Projected Sales (After 6 Months) Amount (Rs.) 40,000,000 30,000,000 10,000,000 5,000,000 8,000,000 6 Lanka Arogya Foods Pvt Ltd 6. PROJECT COST PROJECT COST & MEANS OF FINANCE in Rs.'000 Means of Finance Total (proposed new investment) Bank Equity Loans Land and 30,000 10,000 40,000 Building Machinery, 5,000 equipment’s & 5,000 Fittings Working 5,000 2,000 Capital Total 30,000 20,000 47,000 Debt/Equity Ratio 60%: 40% 7 Lanka Arogya Foods Pvt Ltd 7. FINANCIAL FORECAST PROFIBILITY FORECAST AFTER UTILIZING THE FACILITY (Rs. 000) Description YE YE 31/12/2025 31/12/2026 YE 31/12/2027 YE YE YE 31/12/2028 31/12/2029 31/12/2030 Revenue 25,000 96,000 100,800 105,840 111,132 116,689 Total Expenses 21,250 81,600 85,680 89,964 94,462 99,185 Operating Profit 3,750 14,400 15,120 15,876 16,670 17,503 1,375 3,071 2,521 2,534 1,421 871 2,083 5,000 5,000 5,000 5,000 5,000 2.7 4.7 6.0 6.3 11.7 20.1 1.08 1.78 2.01 2.11 2.60 2.98 Interest Cost Loan Installment Interest Coverage DSCR Assumptions 1. The current monthly revenue is Rs.5,000,000/2. The incremental monthly revenue from 01/01/2026 will be Rs.8,000,000/3.The operating profit margin 15 % 4. Annual revenue growth 5% 5. Loan Tenor – 6 years (annual installment is Rs.5,000,000/=) 8 Lanka Arogya Foods Pvt Ltd 6. The average loan interest is 11% Repayment Plan • Loan repayment will be structured based on projected cash flows. • Increased revenue will ensure timely loan installment payments. • A detailed financial forecast will be provided to the bank with the detailed project report. • Other income sources of Mr. K. Sujeevakanthan could be used as a supportive cash flow for the loan repayments. 8. RISK ANALYSIS & MITIGATION Risk Market Competition Loan Repayment Pressure Production Delays Mitigation Strategy Strengthen branding & distribution network. Conservative financial planning with buffer reserves. Phased machinery installation & workforce training. 9. JUSTIFICATION FOR INVESTMENT • The company already has an established customer base and cash flow. • The IDB Industrial Estate location provides infrastructure benefits (tax incentives, utilities, logistics access). • With better machinery and sales efforts, profitability can increase significantly. 10. CONCLUSION The acquisition and expansion of Lanka Arogya Foods (Pvt) Ltd present a strong growth opportunity in the spice industry. With an investment of Rs. 40 million (including a Rs. 30 million loan), the company aims to scale operations and achieve higher profitability. The existing brand value, combined with strategic upgrades, ensures a high likelihood of success. Submitted by: Mr. K. Sujeevakanthan Proposed Director, Lanka Arogya Foods (Pvt) Ltd Contact: 077 - 9