LRA Upgrades Entity Rating of Janashakthi Limited

LRA takes both consolidated and standalone view on the market positioning and performance of the Janashakthi Limited (“Janashakthi” or “the Company”). The assigned rating incorporates the Company's relative market position as a Holding Company for Janashakthi Group within the financial industry. Janashakthi has presence in various financial verticals namely Life Insurance, Leasing and Finance Sector, Corporate Services, Fund Management, Primary Dealer, and Health and Fitness. The rating reflects Janashakthi's improved financial results, better capitalization and leveraging indicators, and stable performance of its subsidiaries and associates. Healthy dividend inflows from First Capital Treasuries PLC (FCT), a prominent primary dealer subsidiary of the First Capital Holdings (FCH) group within Janashakthi’s group, has been one of the major contributors towards Janashakthi's improved business profile and profitability. Moreover, the overall market conditions, particularly the declining interest rates following 2QFY24, have lowered the financing cost for the Company. The profitability and margins have increased in 9MFY24 due to improved returns emanating from the subsidiaries. Janashakthi's net profit stood at LKR~5.1bn in 9MFY24 in contrast to a net loss of LKR~2.1bn in 9MFY23, while the Group’s net profit stood at LKR~7bn in 9MFY24 compared to a net loss of LKR~1.7bn in 9MFY23; this indicates a profound growth of ~348% and ~518% from the same period last year, respectively. The rating also takes into account the improved debt profile of Janashakthi wherein the total debt, in absolute terms, reduced to LKR~19.1bn as at end-Dec’23 compared to LKR~24.4bn as at end-Mar’23. The Company's leveraging, although still high on relative basis, has reduced as it paid off debt on the back of strong dividend inflow. Furthermore, due to enhanced profit retention, the equity of the Company rose to LKR~10bn as at end-Dec’23 (LKR~4.8bn as at end-Mar’23). Resultantly, the leverage ratio reduced to ~66% as at end-Dec’23 from ~85% as at end-Mar’23. With sustained income generation, financial indicators are expected to improve further in the coming periods. The management envisages diverse income inflows from strategies such as listing of the company on the CSE and settlement of related party receivables. The Company needs to strengthen its governance and control including timely dissemination of key information and financial statements.
The rating is dependent on the Company's ability to successfully execute its planned strategies to generate cash inflows that would further reduce leveraging and improve capital structure. Sustained performance of its subsidiaries is critical. Any substantial drag on equity due to losses or impairment in investments will have a negative impact on the rating. On the other hand, lower debt level, reduced financing cost and improvement in governance standards will result in higher rating.

About the Entity
Janashakthi Limited is a limited liability company incorporated and operating in Sri Lanka since May 1994. The Company's investments currently comprise core investments in its seven subsidiaries in various financial verticals namely Life Insurance, Leasing and Finance Sector, Corporate Services, Fund Management, Primary Dealer, and Health and Fitness. The Company is 100% owned by Schaffters (Pvt) Limited, with the ultimate beneficiaries being two brothers, Mr. Ramesh Schaffter and Mr. Prakash Schaffter.