LRA Maintains Instrument Rating to LOLC Holdings PLC - LKR 05Bn Listed Rated Senior Unsecured Redeemable Debenture

The rating reflects LOLC Holding's (“the HoldCo”) robust position as the ultimate Holding Company of the LOLC Group (the Group) - one of the largest conglomerates in Sri Lanka (Asset Base of LKR~1.7trn – FY24). The Group has diversified geographically and has presence in 25 countries, primarily in South and South East Asia, Central Asia, Africa, and MENA Region. At the broader level, the Group's operating segments are clustered into financial and non-financial segments, with financial segment possessing the higher share of ~89.5% in the Group's revenue. The assigned rating incorporates the cumulative impact of the financial performance of the Group in addition to the standalone performance of the HoldCo. Historically, the HoldCo's financial performance has remained strong despite economic challenges in Sri Lanka. Diversification in other segments and USD based revenues have provided cushion and strengthened profitability. The HoldCo’s net profits have increased to LKR~29.8bn in FY24 from LKR~22.4bn in FY23. The Group’s net profit remained stagnant at LKR~21.7bn in FY24 (FY23: LKR~21.6bn). The debt-to-equity ratio remains comfortable at the HoldCo level but has increased to ~51.3% in FY24 (FY23: ~42.7%). The HoldCo’s financial liabilities are dominated by short-term debts, mostly Commercial Paper (CP) Programs, representing ~62% of the total debt. This is mainly because of higher intercompany lending (FY24: LKR~195.9bn; FY23: LKR~117.6bn). Reduction in interest rates bodes well for the Group and HoldCo, given high amount of debt. Short-term debt is expected to be successfully rolled over but needs to be managed carefully considering higher quantum of borrowings maturing within 12 months. Meanwhile. the HoldCo’s liquidity profile consists of investments, placements with financial institutions and unutilized short-term lines. The Group and HoldCo are taking several initiatives to improve liquidity and reduce debt. The "Rating Watch" signifies these initiatives and materialization of the same in timely manner. These include divestment of certain strategic investments and liquidation of Government Securities.
Successful and timely completion of the management's plan to divest assets and reduce borrowings is important for the rating. Improvement in the debt mix towards long term debt to alleviate pressure on short-term repayments will and reduction in debt level will be positive. Meanwhile, enhanced cashflows from operations and materialization of envisaged plans for income generation are imperative to improve the HoldCo's financial matrix.

About the Entity
LOLC Holdings PLC ("the HoldCo") is a Public Quoted Company incorporated in 1980. The HoldCo became the Holding Company of the Group in 2011. The largest shareholding of the HoldCo lies with Mr. Ishara Nanayakkara (a leading business entrepreneur) with an ownership of around 80%.

About the Instrument
LOLC Holdings PLC currently has LKR 5Bn, Listed, Rated, Senior, Unsecured, Redeemable debentures each worth LKR 100/-. The tenure of the debentures will span for a period of 5 years. Type A Debenture coupons are paid semi - annually at the fixed rate of 15% p.a. (AER – 15.56%) and Type B Debenture coupons are paid semi - annually at a floating rate of weekly AWPLR + 2.5% p.a. The objective of the issue was to finance the five (05) year Rated, Senior, Unsecured, Redeemable Debentures of LKR 5 Bn matured on 24th November 2019.