The Initial Public Offering (IPO) of Renuka Agri Foods was oversubscribed within one hour and managers and registrar of the issue Merchant Bank of Sri Lanka (MBSL) believes it could be about three times oversubscribed once all the applications are accounted for.

In a Colombo Stock Exchange filing, MBSL said the IPO for 120 million shares at Rs. 2.25 each had brought in subscriptions for 161.5 million shares by 9.30 am last morning, the opening day of the issue.

Chairman MBSL Janaka Ratnayaka told the Island Financial Review that this IPO was yet another success story of Sri Lanka’s capital market in the recent past, particularly after the LTTE was militarily defeated last April.

"The IPO was oversubscribed within an hour of opening and we believe by the time the offer is closed today at 4.30, it would be about three times oversubscribed," Ratnayaka said last afternoon.

"The success of the Renuka Agri Foods’ IPO is good sign of things to come in both the capital market and the agriculture industry," he said.

The offer price of Rs. 2.25 is an undervaluation based on the annualised profits of the current financial year which works out to about Rs. 0.50 a share.

Renuka Agri Foods intends to use the funds to settle long term borrowings amounting to about Rs. 48 million and to make investments in plantations, distribution infrastructure and new technology.

The IPO is also expected to facilitate the listing of the company’s ordinary shares on the Diri Savi Board of the Colombo Stock Exchange.