Lanka Rating Assigns Debt Instrument Rating of LOLC Holdings PLC - Commercial Paper- LKR 7Bn

The rating reflects LOLC Holding's (“the Holding Company”) robust position as the ultimate Holding Company of the LOLC Group (the Group) - one of the largest conglomerates in Sri Lanka (Asset Base of LKR~2.0tn: FY25). The Holding Company has gradually transitioned from being primarily focused on financial services to managing a diversified investment portfolio across various sectors, both locally and internationally. The financial services continue to be the core contributor in terms of assets and profitability. Overall, the Group’s operations are divided into financial and non-financial segments, with the financial services segment accounting for ~76.67% of the Profit Before Tax of the LOLC Group. Historically, the Holding Company has maintained strong financial results through diversification into other business segments. The Holding Company’s net profit increased to LKR~49.8bn in FY25 from LKR~29.9bn in FY24. The Group’s net profit has also improved to LKR~41.0bn in FY25 as compared to LKR~21.8bn in FY24. The financial services segment continued to perform well in FY25, driven by the strong results of LOLC Cambodia and LOLC Finance in Sri Lanka. Other financial entities, particularly those involved in microfinance, also showed improved performance, although operations in some countries are yet to achieve profitability. The leisure sector returned to profits with the rebound in tourism in Sri Lanka and other operating regions. The trading and manufacturing segment also improved following losses in the previous year. The Holding Company’s financial matrix remains constrained by low cash profits and high debt dependence. The capital structure reflects an elevated debt-to-equity mix of ~51.3% in FY25 (FY24: ~51%; FY23: ~42.7%) as the absolute quantum of debt has grown significantly. Moreover, the Holding Company’s EBITDA is stressed, as most of its profit represents a non-cash share of income from the group companies. Resultantly, the interest and debt cover of the Holding Company remain weak. The Holding Company’s liquid investments and unutilized funding lines from the Financial Institutions remain relatively low. The Holding Company is undertaking various strategies, including divestment of certain non-core investments and re-strategizing of fund upstreaming through dividends and share repurchases to consolidate and strengthen its financial position.
The rating is dependent on the Holding Company's aptness to improve its financial matrix, particularly in terms of its capital structure, debt mix, and debt repayment capacity. Alleviating pressure on short-term debt reliance is imperative. The rating also factors in the operational cash generation capacity of the Holding Company. Meanwhile, materialization of the envisaged plans, including share buybacks and divestments, remains critical.

About the Entity
LOLC Holdings PLC ("the Holding Company") is a public quoted company incorporated in 1980. LOLC Holdings became the Holding Company of the Group in 2011. The largest shareholding of the Holding Company lies with Mr. Ishara Nanayakkara, with an ownership of around 80%.

About the Instrument
LOLC Holdings PLC intends to issue a LKR~7bn rated commercial paper program which is a short term, non-collateralized (Unsecured) debt instrument. The tenure of the commercial paper spans 12 months, with an interest rate of ~11.25%. The Commercial Papers will be redeemed with the interest and capital repayment being made as a bullet payment.