Lanka Rating Upgrades Entity Rating of Assetline Finance Limited

Sri Lanka's economy made significant recovery in 2024 as the GDP grew by ~5.5% in 2QFY25 after experiencing a challenging two-year period. Inflation continues to decline (-2.1% YoY in November 2024) with stable currency and interest rates in single digits. These improved macroeconomic conditions have translated into relatively lower credit risk and better lending opportunities for Licensed Finance Companies (LFCs). As a result, LFCs are witnessing improved asset quality (Gross NPL ratio 6MFY25: ~12.8%; 6MFY24: ~20.3%) and profitability.

Assetline Finance Limited ("AFL" or the "Company") specializes in offering leasing products with focus on 2-wheelers, 3-wheelers, motor cars, and mini trucks. AFL’s loan portfolio grew by ~29.8% to LKR~36.1bn in 9MFY25 (FY24: LKR~27.8bn), while total assets grew to LKR~47.8bn (FY24: LKR~37.4bn). Loan portfolio mainly comprises 2-wheelers (~26.2%), 3-wheelers (~29.5%) and 4-wheelers (~31.9%) as of 9MFY25. AFL's profitability improved to LKR~1.9bn in 9MFY25 (FY24: LKR~1.3bn), as the borrowing cost has reduced to LKR~1.8bn in 9MFY25 (FY24: LKR~3.2bn) following a decrease in interest rates. AFL maintains strong asset quality with Gross Non-Performing Loan (NPL) ratio of approximately ~8% as of 9MFY25, well below the industry average. AFL has robust capitalization and a Capital Adequacy Ratio (CAR) of ~25.1% as of 9MFY25. In FY23, AFL obtained finance business license. The Company's deposit base has increased to LKR~3.7bn, representing about ~13% of the funding mix in 9MFY25. AFL's rating incorporates its association with the David Peiris Group as its sponsor and major shareholder. Demonstrated support of the sponsor and group synergies augment its profile. David Pieris Group, through David Pieris Motor Company, is the exclusive supplier of "Bajaj" in Sri Lanka. The group's strong financial position and presence in the auto industry positively influence AFL's rating. The rating is constrained by AFL’s mid-sized position, with its asset base representing around ~2% of the industry’s total assets as of 6MFY25. Going forward, the Company aims to strengthen its presence in the 2- and 4-wheeler markets while maintaining its exposure to 3-wheelers while maintaining its NPL ratio below the industry average.
The rating is contingent on AFL’s ability to improve its relative position, sustain funding stability, and maintain NPLs below industry levels. Any deterioration in these factors could negatively impact the rating.

About the Entity
Assetline Finance Limited (AFL), incorporated in 2003, was registered under the Finance Leasing Act No. 56 of 2000 as a specialized leasing company, formerly known as Assetline Leasing Company Limited. In FY 2023, AFL obtained a finance business license under the Central Bank of Sri Lanka’s Non-Bank Financial Institutions Sector Consolidation Plan. AFL is wholly owned by the David Pieris Group and operates under its immediate parent, DPMC Assetline Holdings (Pvt) Ltd., offering leasing and financing products. The Board consists of ~7 members, chaired by Mr. M N R Fernando (Independent Non-Executive Director), includes experts from various fields, with Mr. Ashan Nissanka serving as Director & CEO, supported by an efficient management team.