As a leading brokerage firm in Sri Lanka, Asia Securities (Pvt) Limited (“ASPL” or “the Company”) consistently maintained a sizeable share in market trading volumes. The Company’s main sources of revenue are brokerage income and interest income from broker credit. The Colombo Stock Exchange recorded significant growth in FY25, as market capitalization surpassed LKR 8.0Tn and trading volumes almost doubled. The enhanced market activity and higher investor interest boded well for brokerage firms. Average daily turnover in 1HCY25 rose to LKR ~4.1Bn from LKR ~1.8Bn in 1HCY24. The market is expected to attract investor interest with relatively low interest rates and favorable tax regime.
Building on positive investor sentiment, the Company’s balance sheet expanded significantly in FY25 and its brokerage income doubled. ASPL’s leverage increased to 0.95x in FY25, with the majority of borrowings utilized to support its broker credit portfolio. The leverage level remains comfortably below the regulatory ceiling of 3x. Funding is primarily short term, consisting mainly of bank overdraft facilities and commercial papers. The Company maintains sufficient available lines to meet investor demand for short-term trading opportunities. The Capital Adequacy Ratio (CAR) of ASPL in FY25 was well above the mandated minimum of 1.2x, underscoring its strong capital position and ability to withstand periods of heightened market volatility. Governance was further enhanced during the period with the addition of an independent director, supplementing an otherwise adequately structured board. The Company continues to exhibit key-person risk, given the Chairperson’s key role in investment decisions and overall strategy, while serving in a non-independent capacity. ASPL remains exposed to market volatility and investor confidence.
The rating is dependent on the Company’s ability to maintain and further strengthen its market position as a leading stockbroker while sustaining its performance trends and capital cushion. Effective rebalancing of its portfolio to manage market dynamics and the continued enhancement of governance practices remain important. Any substantial loss arising from unfavorable capital market movements or other factors that weaken its risk absorption capacity could exert downward pressure on the rating.