LRA Assigns 'Rating Watch' to First Capital Holdings PLC's Debt Instrument, Maintains Instrument Rating

LRA has assigned ‘Rating Watch’ to the debt instrument rating of First Capital Holdings PLC (FCH). This is in the wake of the announcement by Peoples Leasing & Finance PLC on the potential acquisition of up to ~33% stake in FCH. The execution of the sales purchase agreement has been affirmed with a target price of LKR 4,958mn. The transaction remains subject to approval by the Central Bank of Sri Lanka. People’s Leasing & Finance PLC will acquire 33% shareholding from Janashakthi Holding and will also have a presence on the board. LRA is closely following the transaction and will consider all aspects once the transaction is finalized. FCH is a prominent Holding Company within the financial service industry. First Capital Treasuries PLC (FCT), the Company’s subsidiary in Primary Dealer activities, has been a major contributor towards FCH's business profile and profitability. Meanwhile, the Company has expanded into multiple financial services avenues including, Capital Markets Advisory, Wealth Management, Fixed Income, and Equities. During FY23, FCH has shown significant improvement and witnessed positive results in the rising interest rate environment. With a view to sustainable diversified revenue streams, management is building upon various revenue segments in terms of both activity-based and fee-based incomes. The rating takes into account the liquidity mechanism to be undertaken by the Company to ensure timely payments of maturing debt obligations.
Rating is dependent upon eventual outcome of the potential acquisition by People's Leasing & Finance PLC and impact it will have on FCH's profile and outreach. Certain synergies are expected from this acquisition and their impact will be reviewed accordingly.

About the Entity
First Capital Holdings PLC (FCH or the Company) is a public limited company incorporated in 1992 under the provisions of the Companies Act No. 17 of 1982 and re-registered under the Companies Act No. 07 of 2007. FCH’s equity stake of 83.02% is held by Janashakthi Limited (formerly known as Janashakthi PLC) as of 31 March 2023. The company’s principal activity comprises investment and management of subsidiaries (6). FCH’s integrated business platform comprises four specialized areas - Capital Markets Advisory, Wealth Management, Fixed Income, and Equities.

About the Instrument
FCH currently has LKR 2.5bn, Commercial Papers in the issue. The tenure of the CP will span for a maximum period of 365 days, with a floating interest rate being offered. At the point of maturity, the Commercial Papers will be redeemed with the interest and capital repayment being made as a bullet payment. The Company will maintain an adequate liquidity buffer with 20% margin of maturities coming up in the next thirty days for the Commercial Papers.