Hela Apparel has initiated court proceedings to wind up the company and two of its principal subsidiaries, marking the end of one of Sri Lanka’s leading apparel exporters after years of mounting financial losses, debt pressures, and unsuccessful restructuring efforts.
Hela Apparel begins court wind-up after debt restructuring efforts fail
The company disclosed to the Colombo Stock Exchange that Hela Apparel Holdings PLC, together with Hela Clothing (Private) Limited and Foundation Garments (Private) Limited, had filed for a court-ordered liquidation under the Companies Act No. 7 of 2007 after determining that the businesses could no longer continue operations.
According to the stock exchange filing, the group reached the decision only after exhausting all available alternatives, including debt restructuring initiatives, strategic investment discussions, and independent financial assessments.
The company stated that every viable option had either been rejected, proved incapable of timely implementation, or was no longer commercially feasible. As a result, management concluded that liquidation was the only remaining course of action.
The collapse of Hela Apparel follows a prolonged period of financial deterioration that accelerated over recent years. For the nine months ended December 31, 2025, the group reported a net loss of Rs.7.57 billion, significantly higher than the Rs.6.35 billion loss recorded during the corresponding period a year earlier.
The company’s revenue also weakened sharply, declining by nearly 29 percent to Rs.43.95 billion, compared with Rs.61.55 billion in the previous year. The decline reflected weaker operating performance amid challenging global and domestic conditions affecting Sri Lanka’s export-oriented apparel industry.
Its financial position continued to worsen, with the balance sheet showing negative total equity of Rs.18.8 billion by the end of 2025. Accumulated losses had climbed to Rs.31.6 billion, while current liabilities of Rs.51.7 billion substantially exceeded current assets of Rs.26.7 billion, highlighting severe liquidity constraints.
Total borrowings stood at approximately Rs.31 billion, while the company’s interest coverage ratio deteriorated to -1.78 times, indicating that operating earnings were insufficient to cover interest expenses.
The company’s financial trajectory represented a significant reversal from its initial public offering in January 2022. At the time, Hela Apparel raised Rs.4 billion, allocating half of the proceeds toward repaying short-term debt and reducing its debt-to-equity ratio from 4.55 times to 2.13 times.
During that period, the company recorded an interest coverage ratio of 1.77 times, which later proved to be its strongest post-listing performance. However, operating losses continued to widen, eventually reaching Rs.4.81 billion during the nine months ended December 2025, causing financial metrics to deteriorate further.
An investment analyst quoted by Echelon Magazine questioned the company’s borrowing strategy, arguing that the scale of debt reflected broader governance concerns rather than simply financing challenges.
Signs of distress became increasingly visible before the liquidation proceedings began. The group’s audited financial statements for the year ended March 31, 2025, received a disclaimer of opinion from its independent auditors, prompting the Colombo Stock Exchange to place the company’s shares on its Watch List in December 2025.
Management also held discussions with financial institutions regarding a proposed debt restructuring involving operational subsidiaries. However, the company was unable to obtain the approvals required to proceed with the restructuring plan.
In June 2026, the Securities and Exchange Commission of Sri Lanka rejected a request to further defer the suspension of trading in the company’s shares. A month later, on July 8, 2026, the company disclosed that it was not complying with corporate governance requirements, stating that its board consisted of only two directors despite regulations requiring a minimum of five.
Before deciding to wind up operations, Hela Apparel attempted to improve its liquidity through asset disposals. The group completed the sale of its stake in UK-based Focus Brands Limited to shareholders of Emerald Investments for US$8 million. Despite the transaction, heavy adjustments meant the company expected to retain only about US$484,000 in residual cash.
In addition, Emerald Clothing (Pvt) Ltd assumed operations at several key manufacturing facilities located in Thihariya, Palapathwala, Naula, and Ukuwela, allowing production at those plants to continue under new management.
The liquidation marks one of the most significant corporate failures in Sri Lanka’s apparel sector in recent years and underscores the financial pressures facing export-oriented manufacturers amid rising costs, debt burdens, and challenging global market conditions.