Investment Grade

Nov 20, 2007 (LBO) – Senkadagala Finance (SF) has seen slower lending and faster growth in higher purchase loans, Fitch Ratings Lanka said, confirming the finance company's 'BBB+(lka) investment grade rating. . "The rating reflects SF's strong profitability and comfortable capitalisation as well as its medium sized asset base and limited revenue and funding diversity," the rating agency said.

The outlook on the rating was stable. Fitch also confirmed the 'BBB+(lka)' national rating given to a 2005/2009 unsubordinated redeemable debenture.

Lending has slowed to 17.2 percent in 2007 because of high interest rates compared to a compound annual growth rate of 66 percent in the period 2003 to 2006 backed by branch expansion.

Hire purchase (HP) loans had grown fast in 2007.

"This was due to the higher demand for HP owing to the tax advantage enjoyed by HP borrowers as rentals do not attract VAT (value added tax), as well as greater activity in the second-hand vehicle market where HP is the preferred option," Fitch said,

HP now dominated the portfolio, accounting for 51 percent of the total at the end of the 2007 financial year while leases were 42 percent of the total.

Healthy margin