SDF-Tier II Listed Rated Unsecured Subordinated Redeemable High Yield Sustainable Bonds

04-Nov-25

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Applicable Criteria

Methodology | Debt Instrument Rating | Aug-24

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Related Research

Sector Study | Leasing & Finance Companies | Feb-25

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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

Rating Type	Debt Instrument
Rating Type	Current (04-Nov-25)	Previous (12-Jun-25)
Action	Upgrade	Initial
Rating	BB+	BB
Outlook	Stable	Stable
Rating Watch	-	-

Sarvodaya Development Finance PLC (“SDF” or “the Company”) is a LFC with strong rural outreach, supported by its long-standing affiliation with the Sarvodaya Movement although its size remains relatively small. The ratings upgrade reflects the Company’s notable improvement in financial performance, strengthened capital position, and continued prudence in asset quality management, supported by its growing footprint in the MSME, leasing, and gold loan segments. SDF's loan portfolio grew by ~25.4% to LKR 24.0Bn in 6MFY26 (FY25: LKR ~19.2Bn) while the profitability improved to LKR ~340.5Mn during 6MFY26 (FY25: LKR ~473.8Mn), supported by lower funding costs, strong portfolio growth, and stable spreads. The sustainability and quality of earnings is critical and will be closely monitored , alongside other key performance indicators, to assess the Company’s ability to maintain its improved financial profile. SDF demonstrated improvement in asset quality, as reflected by lower Gross Non-Performing Loans (NPL) ratio to ~6.0% as of 6MFY26 (FY25: ~7.9%), below the industry average. Following the issuance of Tier II debentures amounting to LKR ~2Bn, SDF’s capitalization remains robust and well above the regulatory requirement, with a Capital Adequacy Ratio (CAR) of ~25.9%. This capital buffer is expected to provide adequate headroom for the envisaged portfolio growth, facilitating the achievement of its FY26 projected growth. The Company's deposit base grew by ~2.7% to LKR ~10Bn during 6MFY26 which makes up ~43% of the funding mix. The rating remains constrained by the Company’s modest market position within the LFC sector and relatively lower profitability, as reflected by its asset base, which constituted around 1.13% of total industry assets as of 3MFY26.

The rating is contingent upon SDF’s ability to strengthen its relative position within the sector and maintain asset quality with NPLs below industry averages. Meanwhile, enhancing profitability, maintaining a healthy CAR ratio (at or above industry average) and expanding market share will be critical to maintaining SDF’s rating. Any significant lapse in these indicators will have adverse impact on the rating.

About the Entity

Sarvodaya Development Finance PLC (SDF) is a public limited liability company incorporated and domiciled in Sri Lanka and is a licensed finance company regulated under Companies Act No. 07 of 2007 and the Finance Business Act No. 42 of 2011. The largest share of the company is owned by Sarvodaya Economic Enterprises Development Services (Gte) Ltd, with an ownership of 36%, while the Sarvodaya Movement collectively owns ~55% of the Company. The management team is headed by the Chief Executive Officer, Mr. Jayanetti, who has experience in business management and strategic leadership in the banking and financial sectors.

About the Instrument

SDF issued a Listed, Rated, Unsecured, Subordinated, Redeemable, Sustainable High Yield Bonds- LKR~2bn - 5 years. The bonds are unsecured and will rank pari passu with other unsecured creditors of the Company, ahead of subordinated debt and equity holders in the event of liquidation. The interest rate is 12% for Type A and 11.66% for Type B.

Lanka Rating Agency Limited

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Tel: +94 11 450 0099

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Lanka Rating Upgrades Debt Instrument Rating of