Jan 31, 2008 (LBO) – Fitch Sri Lanka has confirmed the ‘BB+(lka)’ rating of Trade Finance and Investments, a company that has a strong focus on three wheeler vehicle finance, with a stable outlook. “TFI’s rating takes into consideration its high capitalisation and good profitability. However, the rating is constrained by TFI’s small asset base, limited product diversity and its narrow funding base,” Fitch Ratings said in a statement, Thursday.
TFI has been in operation for 30 years and three wheelers accounted for 95 percent of the assets financed for the nine months ended in December 2007.
The company is mainly funded from equity and borrowings from shareholders which is in contrast to the rest of the industry that uses public deposits and borrowings from financial institutions as the main sources of funding, Fitch said.
With no ‘public’ deposits, the company only has the deposits of related parties which account for 17 percent of total funding.
The return on assets (ROA) before tax was 14.7 percent for the nine months ended December which is above the sector average. Fitch says it has been declining due to increasing effective tax rates that accounted for 58 percent of pre-tax