LANKA RATING ASSIGNS


Preliminary Debt Instrument Rating to

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Associated Motor Finance Company PLC - Tier 2 - High Yield Bonds

12-Jun-25

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Applicable Criteria

Methodology | Non-Banking Financial Institution Rating | Jul-24

Methodology | Debt Instrument Rating | Aug-24

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Related Research

Sector Study | Leasing & Finance Companies | Feb-25


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Analyst

Ruwanthi Sylva | ruwanthi@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
(12-Jun-25)
Action Preliminary
Rating BB-
Outlook Stable
Rating Watch -


Associated Motor Finance PLC (“AMF” or “the Company”) is a relatively small player in Sri Lanka’s Licensed Finance Company (LFC) sector, primarily engaged in vehicle leasing, with a focus on the two-wheeler segment. The Company is planning to issue a Tier 2, listed, rated, unsecured, subordinated, redeemable, high-yield bond with a maximum issue size of approximately LKR~1.25bn with maturity of five years. The objective of the issuance is to support the Company’s portfolio expansion plans. BDO Partners Sri Lanka has been appointed as the Independent External Verifier for this issuance. Due to the subordinate nature of the bonds, the claims of bondholders will rank below depositors, senior debt holders, and secured creditors.
In FY25, AMF demonstrated significant improvement in its financial performance. Net Interest Income (NII) increased to LKR~3.3bn, up from LKR~2.2bn in FY24, reflecting a year-over-year growth of around 52.6%. The Company’s net profit also rose to LKR~750.1mn in FY25 (FY24: LKR~318.3mn). However, asset quality remains a key concern, with the Company reporting a Gross Non-Performing Loan (NPL) ratio of ~15.9%, significantly higher than the industry average of ~8.3%. As of FY25, AMF reported a Capital Adequacy Ratio (CAR) of ~19.2%, which is well above the Central Bank of Sri Lanka’s statutory minimum requirement of 12.5%, though slightly below the industry average. CAR is expected to improve with issuance of Tier 2 bond to provide cushion for growth.
The rating remains contingent upon AMF’s continued ability to execute its strategic objectives, uphold prudent financial management practices and improving asset quality. From a bondholder’s perspective, the effective deployment of bond proceeds and adherence to robust governance standards will be critical to preserving the Company’s financial stability and overall credit profile.
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About the Entity

Associated Motor Finance Company PLC is a licensed finance company incorporated in Sri Lanka on July 25, 1962, and registered under the Companies Act No. 07 of 2007 & Monetary Board of the Central Bank of Sri Lanka (CBSL) under the Finance Business Act No. 42 of 2011. AMF was founded by Mr. J.P.I. Piyadasa in 1962 and was listed on the Colombo Stock Exchange (“CSE”) 2011. In 2021, Arpico Finance Company PLC was amalgamated with and into AMF with Associated Motor Finance Company PLC remaining as the surviving entity. As of FY25. Mr. Nalatha Dayawansa is the largest shareholder of the Company and holds ~47.1% of the AMF's shares. The second largest shareholder is Imperial Import & Export Co. (Pvt.) Limited, with a ~25.7% stake. Imperial Import & Export Co. (Pvt) Limited is a family-owned company of Mr. Nalatha Dayawansa, effectively bringing the family’s ownership to ~72.8%. The Board has 8 members, 4 Independent Non-Executive Directors, and 4 Executive Directors. The Chairman is an independent Non-Executive Director.


About the Instrument

AMF intends to issue a 5-year Tier 2 Listed, Rated, Unsecured, Subordinated, Redeemable High-Yield Bond, with a maximum face value of approximately LKR~1.25bn. The interest rate will be governed by the regulation amended in 2022, which stipulates that the maximum permissible rate on debt instrument is determined by 364-day Treasury bill weighted average yield rate + 4.75%. As an unsecured subordinated instrument, in the event of a winding-up, bondholders’ claims will rank below those of depositors, senior debt holders, and secured creditors, but pari passu with other subordinated creditors. Bondholders will, however, have priority over preference and ordinary shareholders in the capital structure.

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