LANKA RATING ASSIGNS


Initial Rating to

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First Capital Treasuries PLC - Listed, Rated, Subordinated, Unsecured, Redeemable Debenture up to LKR 3Bn

05-Mar-25

01

Applicable Criteria

Methodology | Debt Instrument Rating | Aug-24

02

Related Research

Sector Study | Primary Dealer | Feb-25


03

Analyst

Gayani Randima Ariyawansa | gayani@lra.com.lk
+94 114 500099 | www.lra.com.lk

PRESS
RELEASE

DISCLAIMER

This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to LRA

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Rating Type Debt Instrument
Current
(05-Mar-25)
Action Preliminary
Rating A
Outlook Stable
Rating Watch -


The rating reflects First Capital Treasuries PLC's ("FCT" or "the Company") strong position in the Primary Dealer (PD) market, sustained profitability and robust capitalization. FCT continued to retain its position as a Standalone Primary Dealer (Non-bank). The Company enjoyed an exceptional year in terms of profitability in FY24 on the back of substantial trading gains on Government Bonds due to sharp decline in interest rates. The Company's Profit After Tax (PAT) in FY24 stood at LKR~11.1bn, compared to LKR~2.9bn in FY23. The performance trends normalized but remained strong (after the one-off gains in FY24) as FCT posted PAT of LKR~2.5bn in 9MFY25. The Company's direct income was LKR~8.6bn in 9MFY25 while direct expense (interest costs) stood at LKR~4.8bn in 9MFY25 showing a decline of ~17.8% from LKR~5.8bn in 9MFY24. This is due to the rather stable interest rate environment in 9MFY25 leading to lesser trading gains and mark-to-market gains on bond holdings and lower trading volume. The Company remains exposed to highly cyclical nature of Primary Dealer operations, where profitability is closely linked to interest rate movements and can be volatile. The Company strengthened its capital base to create cushion against potential down cycles as it retained majority of its profits. FCT recorded a healthy Capital Adequacy Ratio (CAR) of ~17.95% in 9MFY25. This is well above the statutory requirement of 10%. The credit risk of the Company remains minimum as a result of investing ~98.6% of its assets in the Government Securities. FCT is planning to issue a LKR~3bn listed, subordinate debenture issue. This will enhance the Company’s Tier II capital and increase total CAR to ~24.80%. At present, borrowings of the Company comprise repo transactions backed by Government securities. FCT intends to adjust its portfolio proactively in line with interest rate dynamics in the country.
The rating is dependent on the Company's ability to maintain its strong market position in the Primary Dealer Sector and sustain performance. Any adverse movement in interest rates, leading to sizeable loss and/or equity erosion will have negative impact on the rating.
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About the Entity

First Capital Treasuries PLC ("FCT" or "the Company") was incorporated on 19th August 1982 as a Public Limited Liability Company under the provisions of the Companies Act No. 17 of 1982 and re-registered under the Companies Act No. 07 of 2007. The Company was incorporated as a money brokering company and was appointed as a Primary Dealer in Government Securities by the CBSL in the year 1992. The Company is a subsidiary of First Capital Limited, which is a subsidiary under First Capital Holdings PLC, the Janashakthi Umbrella. The management team is headed by Mr. Sachith Perera, the Director/CEO of the Company.


About the Instrument

FCT intends to issue Listed, Rated, Subordinated, Unsecured, Redeemable Debenture up to LKR~3bn. The tenure of the debentures is five years. The objective of the issue is to optimize capital, which will increase Tier II capital of the Company which in turn will enhance the Capital Adequacy position.

Lanka Rating Agency Limited

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Tel: +94 11 450 0099

Web: http://lra.com.lk

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