The rating upgrade considers the improved financial performance of EBC at the standalone and Group level against the targets set for FY25. EBC’s financial results have been volatile in the past due to the economic challenges in Sri Lanka. However, with the economy stabilizing and projected growth, the overall financial indicators of the Company and the Group have simultaneously improved. The Company recorded a standalone Profit After Tax (PAT) of LKR~894mln in FY25 (FY24: LKR~481.0mln, FY23: LKR~768.7mln), while for the first half of FY26 (1HFY26), the PAT stood at LKR~277.7mln. At the Group level, the PAT was recorded at LKR~1.2bln for FY25 (FY24: LKR~280.8mln, FY23: LKR~1.5bln), while for the 1HFY26, the Group recorded a PAT of LKR~689.1mln. FY25 reflected a rebound in profitability as compared to FY24. The decline in finance costs, driven by lower policy rates, was offset by higher selling, distribution, and administrative expenses to an extent, as Net Profit Margin stood at ~3.9% in FY25 (FY24: ~1.1%, FY23: ~6.5%). For 1HFY26, the net margin stood at ~4.0%.
EBC maintains a strategic focus on the FMCG sector, identified as the Group’s core investment domain due to its high consumer demand and revenue contribution. Some prominent FMCG brands under EBC include BIC (razors), Denta (toothbrushes), Ninja (pest control), and Amritha (joss sticks). As of FY25, EBC had a moderately leveraged capital structure (~35.2% debt-leveraging). By the end of 1HFY26, debt-leveraging stood at ~35.7%. The Group’s leverage ratio reduced to ~47.8% as of 1HFY26, compared to FY25, wherein the leverage ratio stood at ~50.9%. In addition, the Group's debt mix is skewed towards short-term borrowings, suggesting increased rollover risk. With the improved operating profits and EBITDA, the debt coverage ratio of the Company has improved to 3.1x in FY25 as compared to 1.7x in FY24. This is also partly attributable to the significant decrease in finance costs during the said period.
In addition to the above, EBC raised the Rights Issue proceeds of LKR~1.5Bn in December 2025 with the objective of strengthening its liquidity position through the settlement of short-term borrowings and providing additional capital to its fully owned subsidiary, Darley Butler & Co. Ltd. Accordingly, a further improvement in the Group’s liquidity position and leverage ratios is expected in the next quarter.
The rating is dependent upon EBC's ability to capitalize on the improved economic environment by enhancing margins and increasing profitability. Maintaining a well-balanced portfolio and sustaining the performance of the Group's core businesses & strategic investments are imperative. Furthermore, materialization of the envisaged rights issue and use of proceeds to improve the Group's financial discipline and enhance its capital structure would be a key consideration for higher rating.