Profile
Structure
LOLC Finance PLC ("LOFC" or "the Company") is a publicly listed limited liability company incorporated in 2001, duly registered as a Finance Company under the Finance Business Act No. 42 of 2011, and registered with the Securities and Exchange Commission (SEC) as a Market Intermediary authorized to perform the functions of a Margin Provider. The Company was listed on the Colombo Stock Exchange (CSE) in 2011 and is presently traded on the Second Board of the CSE due to non-compliance with the Minimum Public Holding (MPH) requirement; public holding stood at ~3.69% in FY26 (FY25: ~3.31%) against a required minimum of ~10.00%, with a float-adjusted market capitalization of LKR ~5.78bn (FY25: LKR ~7.35bn).
Background
LOFC is majorly owned by LOLC Ceylon Holdings (Pvt) Ltd (“LOCH”), with the ultimate parent being LOLC Holdings PLC (“LOHP”). LOCH, LOFC, Commercial Leasing & Finance PLC (“CLF”), and LOLC Development Finance PLC (“LODF”) were consolidated under the “LOCH Group” structure in FY21 following a Board-approved transfer of ownership from LOHP to LOCH, sanctioned by the SEC. LOFC subsequently amalgamated with CLF in March 2022 (CLF having previously merged with Singhaputhra Finance PLC on 21-Mar-2022, with the CLF-LOFC merger effective 31-Mar-2022), and further merged with LODF on 31-Jan-2023, consolidating its position as the largest LFC in Sri Lanka by asset base.
Operations
The principal activities of LOFC encompass leasing, granting loans, margin trading, mobilization of public deposits, factoring, digital financial products (including Digital FDs and Savings), renting of properties, and alternative financing solutions. LOFC’s branch network stood at ~203 branches as of FY26 (FY25: ~203), supplemented by ~57 low-cost Super Dealer Points (SDPs) as of June 2026.
Ownership
Ownership Structure
LOFC is majorly owned by LOCH, holding ~96.29% as of FY26 (FY25: ~90.96%), and Phantom Investments (Private) Limited held ~0.37% (FY25: ~0.33%). Prior-year holder LOLC Asia Private Limited (~5.72%) no longer appear on the FY26 register, and individuals and others together held ~3.01% (FY25: ~2.76%). Mr. Ishara Nanayakkara is the Ultimate Beneficial Owner (UBO) of LOFC via his ownership of LOHP.
Stability
Mr. Ishara Nanayakkara, regarded as one of Sri Lanka’s foremost entrepreneurs, has served on LOHP’s Board since 2002 and holds senior positions across the Group’s diversified entities, including Executive Chairman of LOHP, Executive Chairman of Browns Investments PLC, and director roles across more than a dozen related companies spanning battery manufacturing, microfinance (Myanmar, Pakistan), real estate, technology, and capital-holding vehicles, providing continuity and strategic direction across the Group.
Business Acumen
The LOLC Group, under Mr. Nanayakkara’s leadership, has grown into what it describes as the world’s largest multi-currency, multi-geography financing platform and one of the most profitable conglomerates in Sri Lankan history, with operations spanning financial services, insurance, banking, leisure, construction, plantations, trading, and manufacturing, and licensed financial institutions across Sri Lanka, Cambodia, Myanmar, Pakistan, Indonesia, the Philippines, Zambia, Nigeria, Tanzania, Malawi, and Tajikistan.
Financial Strength
On a consolidated basis, the Group’s Profit After Tax (PAT) declined to LKR ~23.4bn in FY26 (FY25: LKR ~41.0bn), while its asset base grew to LKR ~2.32tn (FY25: LKR ~2.03tn), investments in associates rose to LKR ~37.4bn (FY25: LKR ~35.0bn), and total equity increased to LKR ~654.3bn (FY25: LKR ~604.2bn).
Governance
Board Structure
The Board comprises seven directors, of which six are Non-Executive Directors (N-EDs), including four Independent Directors (IDs). Mr. F.K.C.P.N. Dias chairs the Board, and the Chief Executive Officer (CEO) is also a Board member. As of June 2026, the Board comprises F.K.C.P.N. Dias (Chairman/Non-Executive, appointed 2020), D.M.D.K. Thilakaratne (CEO/Executive Director, appointed 2022), B.C.G. de Zylva (Non-Executive, 2018), K.T.C. Priyangani (Independent Non-Executive, 2025), S. Lankathilake (Independent Non-Executive, 2023), J.T. Fernando (Independent Non-Executive, 2026), and M.R. Dewapura (Independent Non-Executive, 2026). Mr. P.A Wijeratne and Mr. A.J.L Pieris retired from the Board during the period, with J.T. Fernando and M.R. Dewapura joined as new appointments.
Members’ Profile
Mr. F.K.C.P.N. Dias, appointed to the Board in 2020, brings close to three decades of fintech and business technology leadership, including over 20 years at executive level. He founded iPay and OYES, and was inducted into the IDG CIO100 Global CIO Hall of Fame in 2020 - the only Sri Lankan to receive the distinction - alongside earlier recognitions including the Computer Society of Sri Lanka’s CIO of the Year (2016) and the Chartered Management Institute of Sri Lanka’s Professional Excellence Award (2017). The other Board members bring extensive expertise in finance, economics, and banking.
Board Effectiveness
Six sub-committees support the Board: The Board Audit Committee (BAC), Integrated Risk Management Committee (IRMC), HR & Remuneration Committee (HRRC), Related Party Transaction Review Committee (RPTRC), Nomination & Governance Committee (N&GC), and Board Credit Committee (BCC). These sub-committees meet periodically against defined Terms of Reference (TORs), with recommendations escalated to the main Board for approval. The BAC is chaired by Mrs. K.T.C. Priyangani, a Fellow of the Institute of Chartered Accountants of Sri Lanka holding an MBA and a Special Degree in Accountancy and Financial Management from the University of Sri Jayewardenepura, with extensive private- and public-sector experience.
Financial Transparency
Deloitte issued an unqualified audit opinion on LOFC’s FY26 financial statements.
Management
Organizational Structure
The Company is headed by the Chief Executive Officer (CEO) and is structured into 10 Business Units (BUs). Each Business Unit is led by a BU Head who reports directly to the CEO of LOLC Finance PLC, ensuring clear accountability and effective oversight of business operations.
Management Team
The management team is led by CEO Mr. D.M.D.K. Thilakaratne, who previously served as Director/CEO of CLF and also sits on the boards of other related companies. He brings over 25 years of financial-sector experience and is supported by a large, appropriately qualified management team.
Effectiveness
Four management committees oversee day-to-day operations: the Credit Committee (CC), Asset & Liability Committee (ALCO), Legal Settlement Committee (LSC), and Management Committee (MC).
MIS
The in-house “Fusion” core banking system underpins operations and is shared across LOFC, CLF, and LODF, integrating information systems and ensuring data consistency across the three entities. This is complemented by online and mobile banking platforms, call center modules, the LOFC trading system, and Oracle. A disaster recovery site hosted at the Mobitel data center operates on an active basis to ensure business continuity.
Risk Management framework
The company operates under a comprehensive Risk Management Governance Framework designed to ensure responsible oversight and effective control of all material risks. As part of this framework, Enterprise Risk Management – Risk (ERM-Risk) maintains an independent reporting line to the Board of Directors through the Chairman of the Board Integrated Risk Management Committee (BIRMC).
Business Risk
Industry Dynamics
There are ~32 Leasing & Finance Companies (LFCs) in Sri Lanka, of which ~31 are listed on the CSE. Sector-wide PAT rose to ~LKR 90.5bn in FY26 (FY25: ~LKR 69.4bn), total deposits rose to ~LKR 1,372.8bn (FY25: ~LKR 1,120.7bn), total loans rose to ~LKR 2,438.2bn (FY25: ~LKR 1,555.1bn), and total assets increased to ~LKR 3,054.1bn (FY25: ~LKR 2,089.3bn). Sector net interest margin moderated to ~9.9% (FY25: ~10.7%), gross Non-Performing Loan (NPL) ratio improved to ~4.4% (FY25: ~8.6%) and Return on Assets (ROA) and Return On Equity (ROE) stood at ~6.2% and~17.1% (FY25: ~6.6% and~15.2%), respectively.
Relative Position
LOFC remains the largest player in the LFC sector by asset base. Its share of sector assets decreased to ~18.3% in FY26 (FY25: ~20.6%), while it held ~19.8% of sector deposits (FY25: ~20.1%), ~17.0% of sector loans and advances (FY25: ~19.0%), and contributed ~30.3% of sector's PAT (FY25: ~36.1%). In absolute terms, LOFC reported PAT of LKR ~27.4bn in comparison with the sector’s ~LKR 90.5bn (FY25: LKR ~25.1bn against ~LKR 69.4bn) in FY26; it recorded a deposit base of LKR~271.5bn against the sector’s LKR~1,372.8bn (FY25: LKR~225.7bn against LKR~1,120.7bn); its reported net loans and advances of LKR~415.5bn against the sector’s LKR~2,438.2bn (FY25: LKR~297.5bn against LKR~1,555.1bn); it recorded an asset base of LKR ~558.6bn against the sector’s LKR~3,054.1bn (FY25: LKR~429.7bn against LKR~2,089.3bn); and reported net equity of LKR~155.4bn against the sector’s LKR~560.0bn (FY25: LKR~149.5bn against LKR~492.9bn). As at FY26, LOFC continues to occupy close to one-fifth of the sector’s deposits, loans, and assets, and around one-third of its profits, reinforcing its position as a systemically significant player in the LFC industry, notwithstanding the narrowing of its relative share as sector-wide growth outpaced its own.
Revenues
Interest income rose by ~15.3% to LKR~78.7bn (FY25: LKR~68.3bn), led by ~58% growth in loan-related interest income to LKR~45.7bn (FY25: LKR~36.5bn; FY24: LKR~40.7bn), now ~58% of the interest income mix (FY25: ~53%; FY24: ~54%), with leases broadly stable at LKR~17.8bn (FY25: LKR~16.6bn; FY24: LKR~17.1bn), or ~23%-24% of the mix, and Overdue Rentals and Others rising to LKR~8.9bn (FY25: LKR~8.2bn; FY24: LKR~7.5bn). Government Securities income declined to LKR~3.2bn (FY25: LKR~3.6bn; FY24: LKR~4.1bn) in line with lower market rates, while Credit Cards contributed LKR~1.5bn, Margin Trading LKR~0.7bn, Term Deposits LKR~0.5bn, and the Factoring Portfolio LKR~0.5bn; Commercial Paper income fell to LKR~17mn (FY25: LKR ~272mn). Net Interest Income (NII) improved from LKR~32.9bn in FY23 to LKR~49.9bn in FY26, with the NII-to-Interest-Income ratio expanding from ~48% to ~63%, driven by loan book expansion rather than margin gains, average lending yields fell to ~20.7% (FY25: ~22.8%) and Net Interest Margin (NIM) moderated to ~11.2% (FY25: ~12.0%). Interest expense rose ~9.9% during the year; while the average cost of deposits eased to ~9.3% (FY25: ~11.2%), the average cost of borrowings rose to ~9.0% (FY25: ~8.2%), reflecting the shift toward wholesale funding.
Performance
PAT rose to LKR~27.4bn in FY26 (FY25: LKR~25.1bn), representing growth of ~9.3%, compared to higher growth rates recorded in prior years. ROA moderated to ~5.5% (FY25: ~6.2%), slightly below the industry average of ~6.2%, while ROE eased to ~18.0% (FY25: ~18.5%), remaining marginally above the industry average of ~17.1%.
Sustainability
LOFC's branch network stood at 203 branches as of FY26. The entity continues to pursue a multi-channel distribution strategy, combining traditional branch expansion with lower-cost formats to extend reach into underserved markets, alongside an ongoing digitization agenda across its lending and deposit products. Management also intends to expand further into agriculture-sector lending, including tractor leasing to Small and Medium Enterprises (SMEs).
Financial Risk
Credit Risk
Asset quality improved meaningfully in FY26, with the reported gross NPL ratio falling to ~5.0% from ~7.3% in FY25 (the adjusted NPL ratio is ~9.2% for FY25 after reclassifying high risk sector and moratorium loans to stage 3) and net NPL to ~3.2% (FY25: ~4.8%), though gross NPL remains modestly above the industry average of ~4.4%. Much of this improvement is attributable to a reduction in Stage 3 reclassifications carried in FY25 for prudent ECL reporting purposes against legacy COVID-19 moratorium exposures in manufacturing, apparel, and textiles, none of which are past due beyond 90 days i.e., part of the Year-on-Year (YoY) gain reflects a normalizing classification base rather than a change in underlying repayment behavior alone. The improvement was broad-based across the book, though risk remains concentrated in specific pockets rather than being systemic: Credit Cards stands out as a clear outlier at an NPL approaching a quarter of that book, while Leasing, Factoring, and Margin Trading also run well above the flagship Loan book, which, despite being the largest single exposure, carries comparatively low delinquency. On a sector basis, Services and Production/Manufacturing are the weakest-performing segments, running at roughly two-to-three times the book average, whereas Consumption, the single largest sector exposure, carries a low NPL despite its size, indicating that credit risk is idiosyncratic to specific segments rather than broad-based. A structural watch-item is the gold loan book: though a modest share of total lending, certain exposures carry Loan To Value (LTVs) as high as ~80%-85% of collateral value, and CBSL’s tightened risk-weighting regime for gold-backed lending (effective September 2026) is prompting management to plan a further reduction in this exposure.
Market Risk
The investment book contracted to LKR ~92.0bn in FY26 (FY25: LKR ~103.8bn), a shift driven almost entirely by the full exit from unit trust holdings during the year, partly offset by continued growth in government securities, which remain the core liquid investment and rose to LKR~33.6bn. This reshuffling raised the proportion of the book subject to market risk relative to total investments even as it fell relative to equity, reflecting a smaller but more standardized portfolio following the unit trust exit. Management intends to shorten the investment portfolio’s maturity profile further, both to reduce interest rate and maturity risk and to meet regulatory requirements.
Liquidity and Funding
The funding base shifted materially toward wholesale sources in FY26: interest-bearing borrowings and overdrafts rose more than fourfold to LKR ~103.9bn (FY25: LKR ~24.2bn), even as customer deposits continued to grow steadily (~10.5% CAGR since FY23 from 201.3bn to LKR ~271.5bn in FY26) and remained the dominant funding source. This rebalancing is also visible in the tenor mix of borrowings, with foreign currency debt carrying a materially longer average tenor than local currency borrowings. The gap analysis below is based on the contractual maturity profile of the Company's assets and liabilities and may not fully reflect the behavioral characteristics of deposit renewals, borrowing rollovers, and loan repayment patterns. On this basis, the short term (up to 3 months) negative liquidity gap widened to LKR ~(60.7)bn in FY26 from LKR ~(43.7)bn in FY25, before turning positive from the 6 to 12 month bucket onward, a profile structurally typical of an NBFI funding shorter tenor liabilities against longer duration assets. The widening, alongside a sharp rise in wholesale borrowings, raises questions over near term liquidity coverage. Depositor concentration remained broadly stable and moderate.
Capitalization
The Tier 1 and Total Capital Adequacy Ratio (CAR) moderated in FY26, to ~23.5% and ~23.3% respectively (FY25: ~26.2% and ~25.9%), consistent with the Company’s ~30% asset growth during the year outpacing the corresponding build-up in capital. Even so, total CAR remain well clear of the ~17% minimum CAR applicable to LOFC given its asset size under Finance Business Act Direction No. 3 of 2018 (against a base sector minimum of ~14% CAR / ~10% Tier 1), leaving a comfortable buffer. However, as per the public disclosures and management of LOFC, the total CAR is expected to drop to ~19.0% by the end of August 2026 as the Company is in the process to repurchase ~2.3bn shares in LKR~16.1bn buyback.
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