Tharika Prabashwari Kodikara
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Methodology | Non-Banking Finance Companies Rating | Jun-22
Sector Study | Leasing & Finance Companies | Aug-23
LRA Assigns Initial Rating to Assetline Finance Limited
Assetline Finance Limited ("AFL" or the "Company") is rated to reflect its medium size and its solid standing in the lending market. The Company specializes in offering leasing products for two- and three-wheelers, motor cars, mini trucks, and more. AFL benefits from the support of its sponsors, the David Peiris Group, which owns David Pieris Motor Company, the sole supplier of Bajaj in Sri Lanka. The David Peiris Group's involvement in the auto business and its strong financial health contribute to the rating. Furthermore, the nationwide presence of David Peiris Motors helps the Company enhance its outreach and establish contact with clients. However, the Company has faced challenges in recent years. Due to import bans on vehicles and economic turmoil, AFL's lending book has decreased. This economic turmoil has led to deteriorating asset quality and a change in provisioning from 180 to 90 days, resulting in increased provisioning costs. Additionally, increased funding costs due to higher interest rates have led to a significant decrease in profitability in FY23. AFL has managed to perform well in terms of profitability in 6MFY24, and it is expected to improve further once interest rates normalize. Despite obtaining a finance business license in 2022, the primary source of funding for the Company remains borrowing. AFL plans to focus on expanding its asset base by leveraging available borrowing lines from both group companies and financial institutions, citing lower administrative costs. Unutilized funding lines provide comfort regarding liquidity. The ratings reflect the Company's strong capitalization, highlighted by robust equity and a Capital Adequacy Ratio (CAR) of ~30%.
The rating is dependent on the relative positioning of the AFL in the sector and its ability to maintain sustained funding plans, ensuring the bottom line remains robust. The ratings also depend upon the Company's continued efforts to enhance their collection efficiency.
Assetline Finance Limited was incorporated in 2003 and registered under the Finance Leasing Act, No 56 of 2000 as a Finance Leasing Establishment – under the specialized leasing company category which was formerly known as Assetline Leasing Company Ltd. The Company was granted a finance business license under the Central Bank of Sri Lanka’s Non-Bank Financial Institutions Sector Consolidation Plan in 2022. AFL is primarily involved in providing leasing and financing products. AFL is wholly owned by David Pieris Group and operates under the immediate parent company, DPMC Assetline Holdings (Pvt) Ltd. AFL Board consists of personnel with extensive knowledge, expertise and experience in different business fields. The Board of Directors is chaired by Mr. Rohana Dissanayaka, while Mr. Ashan Nissanka serving as the CEO. Mr. Nissanka is supported by an efficient management team.