Lanka Rating Assigns Initial Debt Instrument Rating to Guaranteed, Redeemable Zero Coupon 3 Year Debenture (Maximum LKR 01 Bn Face Value) of George Steuart & Company Limited.

George Steuart & Company Limited (“GSCL” or “the Company”), founded in 1835 by Mr. James Steuart, is the holding company of the George Steuart (GS) Group. The Group has significant presence in seven key sectors: tea exports, healthcare, travel, leisure, financial services, industrial solutions and FMCG. GS Group has reported revenue of LKR~30.3bln in FY24 (FY23: LKR~25.1bln) and profit of LKR~177.2mln in FY24 (FY23: -LKR~408mln). GS Healthcare and GS Tea segments have performed well, while GS Consumer, Citrus Leisure and HVA Foods reported losses in FY24. GSCL intends to issue a 3-year, zero-coupon debenture (Up to maximum of LKR~700mln Face Value) to support its subsidiaries/associates in leisure segment that have incurred losses. The rating reflects GSCL's established track record, strong brand name and diverse business profile. The rating incorporates full face value guarantee provided by George Steuart Health Private Limited (GSHPL) at maturity, in case GSCL is not able to repay. GSHPL has agreed to comply with covenants to ensure enough cushion in its cashflow to meet its guaranteed obligations. These include, (i) Leverage Ratio not exceeding 40.0% (ii) Interest Coverage Ratio maintained at 6.0x (iii) Debt Coverage Ratio maintained at 2.0x. GSHPL has reported revenue of LKR~2,997mln and net income of LKR~258mln in 3MFY25.
GSHPL, rated "A", operates in the pharmaceutical industry in Sri Lanka, primarily engaged in import and distribution of pharmaceutical products and equipment has a diverse presence in various pharma verticals namely, (i) Pharmaceuticals (ii) Medical devices (iii) Neutraceutical (iv) Cosmetic (v) Veterinary Medicine & Diagnostics (vi) Optometry (vii) Sports and fitness (viii) 3PL operations.
The rating depends on the Company's ability to ensure sound financial management, sustainable leveraging and debt coverages. Similarly, it is critical for GSHPL to comply with agreed covenants and maintain its rating. Any change in GSHPL's (guarantor) rating will directly reflect in debenture rating.

About the Entity
George Steuart & Company Limited ("GSCL"), founded in 1835, is the holding company of GS Group primarily involved in providing strategic management, centralized support services, research and planning and renting out premises to group companies. GSCL is 93.9% owned by Divasa Equity (Pvt.) Limited. GSCL's Board comprise of 2 Executive Directors, 3 Non-Independent Non-Executive Directors, and 3 Independent Non-Executive Directors. The Company is led by Group Executive Chairman Mr. Ameresekere. GSHPL is a limited liability company incorporated in Sri Lanka in 1975 and reregistered under the Companies Act no. 7 of 2007. GSCL holds a majority stake of 99.58% in GSHPL.

About the Instrument
GSCL intends to issue a redeemable zero-coupon 3-year debenture (Up to maximum of LKR~700mln face value). The discount rate will be determined based on Sri Lankan Government Security (3-year Bond) Rate + Premium. GSHPL's Corporate Guarantee will cover the entire FV.