Lanka Rating Places the Entity Rating of

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Associated Motor Finance Company PLC on "Rating Watch"

14-Jan-26

01

Applicable Criteria

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

02

Related Research

Sector Study | Leasing & Finance Companies | Feb-25


03

Analyst

Imran Iqbal | imran@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 Entity
Current
(14-Jan-26) 		Previous
(19-Feb-25)
Action Maintain Upgrade
Rating BB BB
Outlook Developing Stable
Rating Watch Yes -


The Entity Rating of Associated Motor Finance Company PLC (“AMF” or “the Company”) is placed on a Rating Watch with a Developing Outlook, following the acquisition of the majority shares of the Company by LB Finance PLC on 29 October 2025. Upon approval of the Central Bank of Sri Lanka (CBSL), LB Finance has, so far, acquired ~73.1% shareholding in AMF at a consideration of LKR 50/share, representing a price-to-book ratio of 1.25x (September ’25), with the expectation of increasing its shareholding. The acquisition took place subsequent to the voluntary offer made by LB Finance PLC on October 17, 2025, to purchase 113,327,268 ordinary voting shares, representing 100% of AMF’s shareholding, at LKR 50/share. The acceptance of the majority stakeholders triggered a mandatory offer under the Rules of the Company Take-Overs and Mergers Code, 1995, which required LB Finance to extend the same terms to all remaining shareholders. The majority shareholders have accepted the offer, after which their shares have been acquired by LB Finance. Following the acceptance, LB Finance now holds approximately 73.1% of AMF’s shareholding. LB Finance will be the surviving entity post-merger. AMF will continue to operate as a separate legal entity until the merger is finalized, which is expected on or before 31 March 2027, with a focus on its own portfolio, which primarily comprises two-wheeler financing. The rating is placed on Rating Watch with a Developing outlook in light of the expected merger.
AMF, in its standalone profile, is primarily engaged in vehicle leasing, mainly in the 2-wheeler segment, with a portfolio concentration of 93.8%, and is a small player in the LFC sector, representing approximately 1.0% of total industry assets as of June 2025. The Company's Gross loans and leases portfolio increased to LKR~17.0bn by 2QFY26, registering an impressive growth. The Company posted a net income of LKR~750.0mn in FY25 (FY24: LKR~318.2mn). However, the Company also had a higher gross and net non-performing loans (NPLs) ~18.7% Gross NPL ratio, and Net NPL Ratio of ~12.0% as at 2QFY26, as compared with the industry average, since its target market largely pertained to middle to low-income groups. The Company had an adequate Capital Adequacy Ratio (CAR) (2QFY26: ~16.1%) and a Total Capital Base of LKR~3.4bn as of 2QFY26. AMF intended to issue a 5-year, Tier 2, listed, rated, unsecured, subordinated, redeemable high-yield bond with a maximum face value of approximately LKR ~1.25 bn. The interest rate was to be determined in accordance with the Finance Business Act Directions No. 01 of 2025 issued by the Central Bank of Sri Lanka, based on the prevailing 364-day Treasury bill weighted average yield plus the applicable regulatory margin. As an unsecured subordinated instrument, bondholders rank below depositors, senior debt, and secured creditors, but pari passu with other subordinated creditors, and have priority over preference and ordinary shareholders. However, AMF has withdrawn its proposed 5-year, Tier 2, listed, rated, unsecured, subordinated high-yield bond issuance, following a Board resolution on 17 December 2025. The decision reflects the recent acquisition of a majority stake in AMF by LB Finance PLC and the proposed amalgamation of the two entities, which is expected to generate operational and financial synergies. Consequently, the Company will not proceed with the bond issuance at this time.

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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 & the 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 1962 was listed on the Colombo Stock Exchange (“CSE”) in 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 November 25, 2025, the largest shareholder of the Company (LB Finance) holds ~73.1% of the shareholding. The Board has 7 members: 3 Independent Non-Executive Directors, 2 Non-Independent Non-Executive Directors, and 2 Executive Directors. The Chairman is a Non-Independent Non-Executive Director.

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