ICRA Lanka has reaffirmed the issuer rating of Commercial Credit and Finance PLC (“CCFL”/ “The Company”) while revising the outlook to Stable from Negative. ICRA Lanka has an outstanding rating of [SL]AA (CE) with a Stable outlook for the Rs. 2,000 million Guaranteed Senior Redeemable Debenture programme of the company and also an outstanding short-term rating of [SL]A3 for the Company’s Rs. 1,000 million Commercial Paper Programme.
The outlook revision factors in the improved asset quality indicators and the increase in the asset-backed exposure of the portfolio. CCFL’s gross NPA ratio improved to 9.14% as on Dec-20 from the post-Covid gross NPA ratios of 9.92% as on Mar-20 and 9.28% as on Sep-20. ICRA Lanka notes that the GNPA ratio had further improved to about 6% by Mar-21, following higher recovery levels and NPA write-offs during the last quarter of FY2021. The rating also takes comfort from the increase in asset-backed portfolio over the last three years; about 93%of the portfolio was asset-backed as of Dec-20, compared to 68% asset-backed exposure as of Mar-18. Furthermore, the rating continues to factor in CCFL’s established business presence in Sri Lanka, the experienced Senior Management team, and the adequate capital structure.
ICRA Lanka takes cognisance of the risk profile of the company, as it is exposed to customer segments with modest credit profiles who are highly vulnerable to economic cycles. Going forward, CCFL expects to focus on 3W and 2W leasing together with gold loans while curtailing micro finance and other unsecured lending. CCFL’s ability to maintain healthy asset quality indicators would be a key monitorable.
The outlook revision to “Stable” from “Negative” reflects the improvement of the asset quality indicators of the company. The outlook revision also factors in the increase in exposure to asset-backed lending. The outlook may be revised to “Negative in case of deterioration” in the company’s asset quality levels, weakening profitability. The outlook may be revised to “Positive” in case of an improvement in the capitalisation and asset quality indicators of the company.
ICRA reaffirms Commercial Credit and Finance rating
07 May 2021
ICRA reaffirms Commercial Credit and Finance rating
07 May 2021
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