LANKA RATING ASSIGNS


Preliminary Debt Instrument Rating to

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Alliance Finance Company PLC's Listed, Rated, Unsecured, Subordinated, Redeemable, High Yield Bond

25-Nov-25

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Applicable Criteria

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

Methodology | Debt Instrument Rating | Aug-24

02

Related Research

Sector Study | Leasing & Finance Companies | 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
(25-Nov-25)
Action Preliminary
Rating BBB-
Outlook Stable
Rating Watch -


The assigned rating reflects Alliance Finance Company PLC’s (‘AFC’s’ or 'the Company's') improved financial performance during 1HFY26, supported by a gradual recovery in credit demand and continued focus on sustainable financing. Net Interest Income (‘NIM’) of the Company increased by ~22.34% year-on-year (YoY) to around LKR~4.7bn (1HFY25: LKR~3.9bn), primarily driven by higher interest income from loans and advances as lending activity strengthened following several years of subdued demand. Meanwhile, cost of funds remained low as interest rates have stabilized. Profit after tax rose to LKR~902.4mn in 1HFY26 (1HFY25: LKR~569.7mn), reflecting improved core profitability. Asset quality remained relatively stable, with the non-performing loan (NPL) ratio reported at about ~6.8%, lower than the industry average. The Company’s capital position remained adequate, with a total capital adequacy ratio (CAR) of ~14.5% as at 1HFY26, above the regulatory minimum of 12.5% prescribed by the Central Bank of Sri Lanka (CBSL). The CAR remains below the sector average and peers. Moreover, the assigned rating also factors in the anticipated improvement in AFC’s capital buffers following the proposed subordinated bond issuance, which is expected to strengthen its total CAR and provide additional capacity to support balance sheet growth.

Going forward, the rating will remain sensitive to AFC's ability to achieve its strategic objectives while maintaining its profitability momentum, strong asset quality, sound financial management, sustainable leveraging and diversified funding base. Improvement in CAR is important to ensure growth momentum and sound capital buffers. Any significant deviation in performance or reduction in CAR will have negative rating repercussions.
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About the Entity

Alliance Finance Company PLC is a public listed company incorporated in 1956 under the provisions of the Companies Ordinance No. 51 of 1938 and re-registered under the Companies Act No. 07 of 2007. The largest shareholder of the Company remains Mr. R K E P De Silva with ownership of ~36.87%. The Company has a nine-member Board, out of which three are Independent Directors and three are Non-Independent Non-Executive Directors. The Management team is headed by Mr. De Silva who leads the Company as the Managing Director and the Deputy Chairman as well.


About the Instrument

AFC intends to issue a 5-year Listed, Rated, Unsecured, Subordinated, Redeemable, High Yield Bond up to LKR ~1bn with a green shoe option of LKR~500mn. The bonds are unsecured and subordinated, ranking after all secured and other unsecured creditors, pari passu with other subordinated creditors, and ahead of preference and ordinary shareholders in the event of liquidation. The primary objective of the Bond Issue is to enhance and strengthen the Company’s capital base while ensuring compliance with the capital adequacy requirements stipulated by the CBSL. The proposed bond issue is intended to strengthen AFC’s capital base, ensure compliance with CBSL capital requirements, and support lending expansion without diluting shareholder ownership.

Lanka Rating Agency Limited

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