LRA Assigns Initial Entity Rating to WealthTrust Securities Limited.

WealthTrust Securities Limited (“WTSL” or “the Company”) is an authorized standalone Primary Dealer (PD) in Sri Lanka. PDs deal in Government securities (treasury bills and treasury bonds) in both primary and secondary markets. They remain exposed to market risk (interest rate fluctuation). WTSL has an established track record as a PD and a modest share in terms of total assets of standalone PDs. The rating reflects WTSL's robust capitalization, significant increase in profitability and profit retention on the back of substantial drop-in interest rates recently and its well managed risk exposure. The Company also functions in the capacity of a stock dealer (debt)/ stockbroker (debt), licensed by the Securities and Exchange Commission of Sri Lanka. WTSL's management is seasoned and carry strong relevant experience and qualifications. The board size is adequate with a non-independent director as the Chairman. WTSL posted robust profitability on back of sizeable gain on high-yielding treasury bonds subsequent to sharp reduction in interest rates. This was in line with other PDs who enjoyed wind fall gains as well. The Company recorded a healthy Capital Adequacy Ratio (CAR) of ~43.01% in FY24 which is well above the statutory requirement of ~10%. The credit risk of the Company remains minimum as a result of investing ~90% of its assets in the Government Securities. WTSL, like other PDs, is exposed to interest rate fluctuations and rebalances its portfolio between short-term and long-term Government securities to mitigate this to an extent. The Company has appointed E&Y as their external auditors in FY24. Going forward, the Company is expected to sustain its performance, albeit at lower profitability, as interest rates are expected to remain relatively stable.
The rating is dependent on the Company's ability to maintain and further strengthen its market position as a non-bank PD while maintaining its performance trends and capital cushion. Effective rebalancing of portfolio to encounter market dynamics and strengthening governance practices remains important. Any substantial loss due to unfavorable movement in interest rate or otherwise, impacting its risk absorption capacity, would have negative rating implications.

About the Entity
WealthTrust Securities Limited (“WTSL” or “the Company”) was incorporated on 1st February 2010 as a limited liability company under the Companies Act, No. 07 of 2007, and commenced commercial operations on 21st September 2011. WTSL is an authorized Primary Dealer appointed by the Central Bank of Sri Lanka (CBSL). The Company's ownership vests with six corporates holding ~69.2% stake. The Board comprises of five members. Out of these, four are Non-Executive Directors (two independent & two non-independent), and the MD/CEO.