Lanka Rating Assigns Initial Debt Instrument Rating to Brown and Company PLC - Guaranteed Redeemable Debentures - LKR 02bn (Maturity 2027)

Brown and Company PLC ("BRWN" or "the Company") is the part of Browns Group ("the Group"). The Group has diversified interests in Automotive and Hardware, Pharmaceuticals, Consumer and Industrial Engineering Solutions, Agriculture and Heavy Machinery, Agribusiness and Plantations, Leisure and Entertainment, and Construction sectors. The Company operates as both an operating and holding Company. It operates in various business Standard Business Units (SBUs) that have exhibited mixed performance. Agriculture, Pharma and certain manufacturing SBUs are performing well, while general trading, heavy machinery and power systems are struggling, posting sizeable losses in FY24. As holding company, BRWN's investments have yet to yield desired results. The Company has financed acquisitions through borrowings from parent and financial institutions. The high finance cost has led to losses and deteriorating coverage ratios in FY24 and 1QFY25.
The Debt Instrument Rating reflects the unconditional and irrevocable Corporate Guarantee provided by LOLC Holdings PLC in favor of the Trustee for the benefit of the Debenture Holders, guaranteeing both interest and principal payments for up to two Interest Periods. LOLC Group, a leading financial services company, has a diverse portfolio of investments in ~25 countries. LOLC Group's operating segments are clustered into financial and non-financial segments, with the financial segment possessing the higher share (~89.5%) in the Group's revenue. LOLC Holdings had consolidated assets of LKR~1,740bln and net income of LKR~21.8bln in FY24.
The rating depends on the LOLC Holdings rating as well as continued support from them. Any change in the rating of LOLC Holdings will impact the rating of Debenture.

About the Entity
Brown and Company PLC ("BRWN" or "the Company") is a publicly quoted Company, domiciled in Sri Lanka and listed on the Colombo Stock Exchange (CSE). The address of the Company’s registered office is No. 481, T. B. Jayah Mawatha, Colombo 10, Sri Lanka. LOLC Holdings PLC owns ~83.42% shares of BRWN. The Board comprises 07 members: 4 non-executive and 3 executive directors, with two independent directors. Mr. Ishara Nanayakkara is the Executive Chairman of the Board and Mr. Thamotharampillai Sanakan is the Group CEO.

About the Instrument
BRWN has issued LKR 2Bn, Listed Rated Guaranteed Senior Redeemable Debentures each worth LKR 100/- in March 2022. The Debentures have a tenure of 5 years. Type A Debenture coupons were paid Annually at the fixed rate of 15.50% p.a. (AER – 15.50%) and Type B Debenture coupons were paid quarterly at a fixed rate of 15.42% p.a. (AER –16.33%). LOLC Holdings has provided an unconditional and irrevocable Corporate Guarantee in favor of the Trustee for the benefit of the Debenture Holders, guaranteeing both interest and principal payments for up to two Interest Periods.