LRA Assigns 'Rating Watch' to Janashakthi Limited, Maintains Entity Rating

LRA has assigned ‘Rating Watch’ to the Entity Rating of Janashakthi Limited (herein referred to as "Janashakthi"). This is in the wake of the announcement by People's Leasing & Finance PLC of potential acquisition of ~33% shareholding in First Capital Holding PLC (FCH), by the divestment of shares of Janashakthi from ~83% to ~50%. The execution of sales purchase agreement has been affirmed with a target price of LKR~37.10/share amounting to a total consideration of LKR~5bln. The transaction remains subject to the approval by the Central Bank of Sri Lanka and other regulatory authorities applicable to the parties. People’s Leasing & Finance PLC will acquire ~33% shareholding from Janashakthi Holding and will also have presence on the board. LRA is closely following the transaction and will consider all aspects once the transaction is finalized. The materialization of this transaction is expected to have a positive impact on Janashakthi's financial risk profile, as it would ease out the cashflow crunch currently stressing the financial position of the Company. FCH is a prominent Holding Company within the financial service industry under the Janashakthi arm. First Capital Treasuries PLC (FCT), the Company’s subsidiary in Primary Dealer activities, has been a major contributor towards FCH business profile and profitability. The rating takes into account the liquidity mechanism to be undertaken by the Company to ensure timely payments of maturing debt obligations.
The rating is dependent on the Company's ability to successfully execute its planned strategies to generate cash inflows that would reduce its debt leveraging. Materialization of the sales purchase agreement is critical and is placed under close surveillance. Moreover, improvement in the debt matrix to off-load mounting debt repayments through recurring income streams is imperative.

About the Entity
Janashakthi Limited is a limited liability company incorporated and operating in Sri Lanka since May 1994. The registered office and place of business of the Company are in Colombo. The Company's investments currently comprise core investments in its six subsidiaries i.e., Janashakthi Insurance PLC, Janashakthi Capital Limited, Orient Finance PLC, First Capital Holdings PLC, Janashakthi Corporate Services Ltd, and Janashakthi Business Services (Pvt) Ltd. The Company is 100% owned by Schaffters (Pvt) Limited, with the ultimate beneficiaries being two brothers, Mr.Ramesh Schaffter and Mr. Prakash Schaffter. Both brothers hold equal stakes, i.e., 50% ownership of Schaffters (Pvt) Limited. Janashakthi Limited is the ultimate parent company of the Group and it owns 79.03% of its main subsidiary Janashakthi Insurance PLC which is listed and has a market capitalization of LKR 5.1bn. The Company owns 93.69% of Orient Finance PLC which has a market capitalization of LKR 1.8bn. The Company has ownership of 83.01% in First Capital Holding PLC with a market capitalization of LKR 11.3bn.

About the Instrument
NA