Lanka Rating Maintains


the Debt Instrument Rating of

LRA Logo

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

16-Sep-26

01

Applicable Criteria

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

Methodology | Debt Instrument Rating | Aug-24

02

Related Research

Sector Study | Leasing & Finance Companies | Apr-26


03

Analyst

Nipuni Mihirangi | nipuni@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

LRA Logo
Rating Type Debt Instrument
Current
(16-Sep-26) 		Previous
(04-Nov-25)
Action Maintain Upgrade
Rating BB+ BB+
Outlook Stable Stable
Rating Watch - -


Sarvodaya Development Finance PLC (“SDF” or “the Company”) is a relatively small LFC with strong rural outreach, supported by its longstanding affiliation with the Sarvodaya Movement and connected societies. The assigned rating reflects the Company’s improving financial performance, strengthened capitalization, and continued improvement in asset quality, supported by strong loan portfolio growth and its focus on microfinance, SME, society bulk loans, and agriculture-related lending. SDF’s loan portfolio grew by ~55.2% to LKR~29.8bn in FY26 (FY25: LKR~19.2bn), while profitability improved to LKR~820.1mn during FY26 (FY25: LKR~473.8mn), supported by strong portfolio growth, lower funding costs, and stable spreads. The sustainability and quality of earnings remain critical and will be closely monitored, alongside other key performance indicators, given the Company’s modest profitability despite the improvement in earnings. SDF demonstrated further improvement in asset quality, with the gross NPL ratio declining to ~4.9% in FY26 , while the net NPL ratio stood at ~2.9%, although asset quality remained above industry averages. The improvement was supported by recoveries as well as rapid loan portfolio expansion. The Company maintains strong capitalization, with a CAR of ~22.1% as at FY26 (FY25: ~20.6%), providing adequate headroom for the envisaged portfolio growth and supporting its FY27 growth plans. The deposit base grew by ~7.8% to ~LKR~10.6bn during FY26 (FY25: ~LKR~9.8bn), accounting for ~34% of the funding mix, while the proportion of borrowings increased in total funding, consistent with broader LFC sector trends. The rating remains constrained by the Company’s modest market position within the LFC sector, with its asset base and deposits accounting for ~1.2% and ~0.8% of the sector, respectively, as at FY26, together with its relatively modest profitability.

The rating is contingent upon the sustainability and improvement in the Company's quality of earnings and will be closely monitored. Similarly, upholding other key performance indicators like asset quality and capitalization will be important. Improvement in relative position within the sector and significantly enhancing profitability will have positive impact on the rating.
LRA Logo

About the Entity

SDF is a public limited liability company incorporated and domiciled in Sri Lanka. It is a licensed finance company regulated under Companies Act No. 07 of 2007 and the Finance Business Act No. 42 of 2011. Sarvodaya Economic Enterprises Development Services (Gte) Ltd is the largest shareholder of the Company (36% stake), 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

No. 145,
Kynsey Road, Colombo 00800, Sri Lanka

Tel: +94 11 450 0099

Web: http://lra.com.lk

E-mail: info@lra.com.lk