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 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 the eventual outcome of the potential acquisition by People's Leasing & Finance PLC and the 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 2bn, listed, rated, senior, unsecured, redeemable debentures each worth LKR 100/-. The tenure of the debentures will span for a period of 60 months. The coupon paid is a floating rate of weekly AWPLR + 2.00% p.a. payable annually with a ceiling of 12% & a floor of 9%. The debenture was opened for subscription on 1-Feb'21 and closed on 8-Feb'21. The objective of the issue is to provide the necessary long-term stable funding to facilitate the future expansion of business activities (i.e., balance sheet growth) of the Company with favorable funding options.