Lanka Rating Assigns Initial Entity Rating to Asia Securities (Private) Limited

Asia Securities (Private) Limited ("ASPL" or "The Company") is a leading brokerage firm in Sri Lanka with market share in the early double digits in terms of trading volume. The Company's two major revenue components are brokerage income and interest income earned on broker credit. ASPL's revenues remain contingent on variable trading volumes and investor interest in stock market. The Company, being a member of the Colombo Stock Exchange, also engages in proprietary trading and thus is exposed to inherent volatility in the capital markets. The rating reflects ASPL strong capitalization, sponsors' extensive experience in the capital markets, sustained profitability and well managed risk exposure. The board size is adequate with the Chairperson being a non-independent director. Investment and overall strategy is driven mainly by the Chairperson and the Company remains exposed to key-person risk. ASPL remained profitable in turbulent times due to effective investment management. The Company recorded strong profitability on the back of sales of high yielding treasury bonds subsequent to sharp reduction in interest rates. The Company has significant related party exposure (~29% of equity) and during FY24, made a significant investment in its subsidiary. Further capital requirements could strain the Company's financial profile. Other capital market related businesses are held by the sponsors separately to avoid any regulatory complications. The Company's leverage ratio was ~0.6X in FY24 with interest coverage ratio of ~4.0X. The Company recorded a healthy Capital Adequacy Ratio (CAR) of ~3.4X in FY24, which is well above the statutory requirement of 1.2X. Going forward, the Company is expected to sustain its performance, albeit with an element of uncertainty as the equity markets are driven by economic and political factors and investor sentiment.
The rating is dependent on the Company's ability to maintain and further strengthen its market position as a leading stock broker 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 capital markets or otherwise, impacting its risk absorption capacity, would have negative rating implications.

About the Entity
Asia Securities (Private) Limited (“ASPL” or “the Company”) is a limited liability company incorporated and domiciled in Sri Lanka. The Company is registered under the Securities and Exchange Commission as a Stockbroker to perform the functions of a stock brokerage. Furthermore, the Company also functions as a Stock Dealer, licensed by the SEC. The registered office and principal place of business of the Company are located at 4th Floor, Lee Hedges Tower, No. 349, Galle Road, Colombo 03.