ICRA Lanka Ltd. has assigned the issue ratings of (SL)A with a Stable outlook for the proposed Rs. 10,000 million Senior Unsecured Redeemable Debenture Programme of LOLC Holdings PLC.
ICRA Lanka has an outstanding issuer rating of (SL)A with a Stable outlook for LOLC Holdings PLC. ICRA Lanka also has an outstanding issue rating of (SL)A with a Stable outlook for the Rs. 5,000 million Senior Unsecured Redeemable Debenture Programme, the issue rating of (SL)A with a Stable outlook for the outstanding Rs. 2,000 million Senior Unsecured Redeemable Debenture Programme and the issue rating of (SL)A1 rating for the enhanced Rs. 3,000 million Commercial Paper Programme of the company.
ICRA Lanka has taken a consolidated view of the performance of the LOLC group, which has interests in various segments including financial services, insurance, manufacturing, trading, plantation, renewable energy, and leisure for arriving at the ratings. However, the group performance is primarily driven by the finance sector of the group and hence the ratings reflect the same.
The ratings factor in the group’s long track record and leadership position in the Sri Lankan non-banking financial institutions (NBFI) sector, its experienced management team, commensurate risk management systems, and its adequate funding profile. The ratings also take comfort from the improved capitalisation and liquidity profile of the group, post PRASAC divestment. Group gearing1 has reduced to about 2.6 times as in September 2020, from 5.3 times in March 2020. LOLC has access to funding, through its diversified funding profile, which includes local and foreign funding partners.
However, ICRA Lanka takes note of the weakening in the asset quality profile of its Sri Lanka-based non-bank finance companies (NBFCs) and the deterioration in the overall earnings profile during 6MFY2020, as net interest margin (NIM) moderated and credit cost increased. The group’s ability to control incremental slippages and improve the overall asset quality over the next six months will be a key monitorable, going forward.
While ICRA Lanka takes cognisance of the diversification to newer geographies (Cambodia, Myanmar, Indonesia, and Pakistan) over the recent past by the LOLC group, ability to manage country-specific risks across businesses and regulatory cycles would be crucial from a rating perspective. Further, ICRA Lanka would continue to monitor the performances of the non-financial service entities and their contribution to the overall group going forward.
ICRA Lanka believes that the LOLC group, on the back of its established presence, business experience, and funding raising ability would be able grow its business and provide timely and adequate capital support to the various group entities. The outlook may be revised to “Negative” in case of further weakening in the profitability and asset quality indicators of the group. The outlook may be revised to “Positive” in case of a significant improvement in the overall financial profile of the group and if the portfolio profile and asset quality improve.
ICRA Lanka assigns (SL)A for LOLC’s proposed senior debt
16 Feb 2021
ICRA Lanka assigns (SL)A for LOLC’s proposed senior debt
16 Feb 2021
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