Vallibel Finance PLC - LKR 3Bn Subordinated - Unsecured - Redeemable Debenture

CREDIT RATING REPORT | Sep-26

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Rating History
Dissemination Date Rating Outlook Action Rating Watch
02-Sep-26 BBB+ Stable Maintain -
26-Sep-25 BBB+ Stable Upgrade -
20-Aug-24 BBB Stable Preliminary -
About the Entity

Vallibel Finance PLC is a public limited liability company incorporated and domiciled in Sri Lanka and listed on the Colombo Stock Exchange. Subsequent to the acquisition by Vallibel Investment (Pvt.) Limited in 2005, it became Vallibel Finance. The principal activities of VFIN are accepting deposits, granting finance leases, vehicle loans, auto drafts, gold loans, and other credit facilities. The Board of Vallibel Finance PLC consists of seven members: four of whom are Independent Non-Executive Directors, one Non-Executive Director who also serves as the Chairman, and two Executive Directors. The Board has appointed Mr. K D A Perera in 2023 as the Chairman. Mr. J. Kumarasinghe has been a Senior Independent Director since the Chairman is Non-Independent.

Rating Rationale

Vallibel Finance PLC (VFIN or "the Company") is a licensed finance company (LFC) in Sri Lanka, affiliated with the Vallibel Group, and engaged primarily in vehicle financing, auto drafts, gold-backed lending and leasing. VFIN held a ~6% share of Sector assets in FY26, with total assets rising ~61% to LKR ~180.29Bn (FY25: LKR ~111.68Bn), one of the highest growth rates in the Sector. The branch network expanded to 87 outlets in FY26 (FY25: 75) as the Company continues to increase its footprint.

The rating affirmation reflects VFIN's strong asset quality, consistent financial performance, and continued sponsor support as reaffirmed through an equity infusion via the recent rights issue. The Company has undertaken very high growth, which has moderated capitalization buffers despite the equity injection.

VFIN's profitability improved during FY26, with PAT rising to LKR ~3.6Bn (FY25: LKR ~2.6Bn), supported by lower funding costs, strong portfolio growth, and stable spreads. Despite this improvement, ROA moderated to ~2.46% (FY25: ~2.57%), remaining below the industry average, as earnings have yet to match the rapid asset growth. In contrast, ROE improved to ~21.65% (FY25: ~18.72%). Asset quality metrics remained strong during FY26, with gross and net NPL ratios reducing to ~2.53% and ~1.07% respectively, both well below industry averages. This is a key distinction of the Company, primarily driven by strong recoveries. Meanwhile, strong expansion of the loan portfolio also lowered these ratios.

The Company's capital profile weakened during FY26, as portfolio expansion outpaced internal capital generation, driving the Capital Adequacy Ratio (CAR) down to ~14.79% (FY25: ~21.51%). To support its capital base, the Company completed a rights issue of LKR ~2Bn in May 2026, which increased the CAR to ~15.7%. However, the ratio remains below the industry average of ~18.4%. The Company's envisaged growth plans and sustained portfolio expansion could put pressure on capitalization in FY27.

The Company's deposit base grew by ~23.7% to LKR ~83.5Bn during FY26, though its share in the overall funding mix declined to ~53% (FY25: ~73%), as the proportion of borrowings increased, consistent with the broader trend observed across the LFC Sector. Liquidity remained adequate during FY26, supported by a sizeable allocation to G-Secs, which accounted for ~76.4% of total investments (FY25: ~86.5%). However, the top 20 depositor concentration remained elevated at ~22.6%, exceeding peer levels and indicating a degree of funding concentration risk.

Key Rating Drivers

The rating continues to depend on the Company's ability to sustain asset quality and profitability while rebuilding and maintaining adequate capital buffers commensurate with its growth trajectory. Adverse trends, particularly a further weakening of capital ratios, deteriorating asset quality, or increased funding concentration would have negative rating implications.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

METHODOLOGY

  • Methodology | Non-Banking Financial Institution Rating | Jul-24

  • Methodology | Debt Instrument Rating | Aug-24

RELATED RESEARCH

  • Sector Study | Leasing & Finance Companies | Apr-26

RATING ANALYST

  • Imran Iqbal
  • imran@lra.com.lk
  • +94 114 500099
  • lra.com.lk

Vallibel Finance PLC - LKR 3Bn Subordinated - Unsecured - Redeemable Debenture

rating analysis

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Issuer Profile
Profile
Vallibel Finance PLC (the "Company" or "VFIN") is a public limited liability company incorporated in Sri Lanka, regulated under the Finance Business Act No. 42 of 2011. It has been listed on the main board of the Colombo Stock Exchange since 2010. Prior to the acquisition by Vallibel Investment (Pvt) Limited (the parent company) in 2005, it was known as Rupee Finance Company Limited. VFIN has a wholly owned subsidiary, Vallibel Properties Limited, formed to manage the construction and maintenance of the new corporate office building. VFIN is engaged in providing financial solutions and offering products and services, such as leasing, vehicle loans, auto drafts, gold loan and fixed deposits.
Ownership
VFIN is a listed company. Vallibel Investments (Pvt.) Limited is the major shareholder with ~51.44% followed by Mr. Dhammika Perera (~21.4%) and Mr. Anuradha Perera (~3.62%), who is the current Chairman. Altogether, the Perera family owns ~79.10% of the stake as at FY26. Vallibel Investments (the parent company) with equal proportions is owned by Ms. K. A. D. B. Perera and Ms. K. A. D. K. Perera, daughters of Mr. Dammika. The succession has taken place as the next generation of Mr. Dammika is about to reign over the business affairs. Vallibel Investments (the parent company) with equal proportions is owned by Ms. K. A. D. B. Perera and Ms. K. A. D. K. Perera, daughters of Mr. Dammika. The succession has taken place as the next generation of Mr. Dammika is about to reign over the business affairs. Vallibel Group is well established and positioned in the market. The Group has supported VFIN during the crisis period in order to strengthen the Tier II capital by way of subordinated debt.
Governance
The Board of Vallibel Finance PLC consists of seven members: four of whom are Independent Non-Executive Directors, and two are Non-Executive Directors. The Chairman serves as a Non-Executive Non-Independent the Board has appointed Mr K D A Perera in 2023 as the Chairman. The Board is comprised of individuals with broad knowledge, expertise, and experience across diverse business sectors, which provides the Company with a strong competitive advantage in the industry. The Chairman also serves as a Director in several private sector entities within the Vallibel Group. VFIN operates through six Board Committees, which held a total of thirteen meetings during FY26. Attendance at these meetings was maintained at a satisfactory level. The External audit carried out by the E&Y Chartered accountants of Sri Lanka, and they have given an unqualified audit opinion on the financial statements for the year end of 31st March 2026.
Management
The organizational framework of the Company consists of eight distinct divisions, with overall authority resting with the Managing Director. The Management team is highly experienced and knowledgeable, led by Mr. S. B. Rangamuwa, who serves as the Managing Director. The Company operates through four management committees the Assets and Liability Management Committee ("ALCO"), Credit Committee ("CC"), IT Steering Committee ("ITSC"), and Executive Integrated Risk Management Committee ("EIRMC") with the management team convening on a regular basis. The Company has made investment in information technology, deploying platforms such as eFinancials, CRM, KTMS, ALM, BI, and AI-driven tools to support core operations, customer relationship management, and AML compliance. Governance and oversight are further reinforced by strong compliance and cybersecurity frameworks, backed by a dedicated management team and an actively engaged Board. The Company operates under a comprehensive risk management policy, overseen by the IRMC and Audit Committee, with enhanced compliance, cybersecurity, and governance frameworks that underpin long-term stability and shareholder value.
Business Risk
At present, there are ~31 LFCs in Sri Lanka, of which ~30 are listed on the CSE. By FY26, the Profit After Tax (PAT) of LFCs in Sri Lanka was reported at LKR~89.38bln (FY25: LKR~69.38bn). In FY26, the Return on Asset (ROA) stood at ~6.2% (FY25: ~6.6%), and the Return on Equity (ROE) at ~17.1% (FY25: ~15.2%), respectively. The total asset base of the LFC sector stood at LKR~3,055.28bn (FY25:LKR~2,089.27bn) as of FY26, of which LKR~2,450.26bn (FY25:LKR~1,566.71bn) are categorised as net loans/advances. The gross Non-Performing Loan (NPL) ratio stood at ~4.1% (FY25: ~8.6%) in FY26. VFIN represented approximately 3.2% of the total equity of the LFC industry as at FY26 (FY25: ~3.1%). Moreover, the Company's asset base contributes to ~6% of the industry assets in FY26 (FY25: ~5.3%,). VFIN's loans and advances represented ~5.9% of the LFC and SLC sector's total loans and advances asset base in FY26, compared to ~5.8% in FY25. Similarly, VFIN's deposit base accounted for ~6.1% of the sector's total deposit base in FY26, compared to ~6.0% in FY25. Net interest income rose ~36.1% YoY to LKR~11.04bn in FY26 (FY25: LKR~8.1bn), driven by interest income growth of ~37.2% to LKR~23.2bn, which outpaced the ~38.4% rise in interest expense to LKR~12.2bn. Vehicle-backed and gold-backed lending together contributed ~54.2% of total interest income, up from ~53.9% in FY25. Auto draft income rose ~27.7% to LKR~6.43bn from ~24.6% in FY25. Lease income rose modestly to LKR~3.02bn, but it's share fell to ~13.0% from ~17.4%. The core spread narrowed to ~7.8% (FY25: ~8.8%) due to faster repricing of earning assets relative to funding liabilities. VFIN's PAT grew ~36.5% YoY to LKR~3.58bn in FY26 (FY25: LKR~2.62bn), higher interest and other income. The Non-mark-up Expense to Total Income ratio rose to ~22.3% (FY25: ~22.0%), reflecting steady cost pressure. Overall lending rates and WACC both declined, keeping spreads broadly stable at ~7.0% (FY25: ~7.2%). Gross advances surged ~67.8% to LKR~161.04bn, driven by vehicle loans, auto drafts, and gold loans, which together comprised ~81.8% of the portfolio. VFIN has laid out a three-year strategic roadmap centred on growth and expansion. The Company intends to establish new branches in underpenetrated regions to widen accessibility and grow its market presence. Growth in market share will be supported by new product launches, results-driven sales teams, and the rollout of Margin Trading, Digital/Online Services, and Islamic Banking offerings. Plans are also in place to scale up the property loan segment, with gold loans projected to make up close to one-third of the overall portfolio.
Financial Risk
VFIN's Gross NPL improved to ~2.53% in FY26 (FY25: ~3.56%), well below the industry average of ~4.4%, despite ~67.8% growth in advances. Lease remains the largest NPL contributor, though auto draft's share rose sharply to ~23.7% (FY25: ~11.6%), followed by vehicle loans as the second-largest contributor. Net NPL for FY26 stood at ~1.1%, compared to -0.37% in FY25. Top 20 deposit concentration rose to ~23% in FY26 from ~21%. VFIN's investments shifted toward placements with banks LKR~4,810mn, up from LKR~570mn, while Treasury Bills declined to LKR~340mn (FY25: LKR~3,097.6mn) and reverse repos rose to LKR~4,560.9mn. Gold loan concentration reached 22% in FY26, guided to ~25% by FY27, exposing earnings to gold price volatility amid recent price declines. The Company's maximum LTV of 75% exceeds CBSL's 70% regulatory cap, compounding collateral risk. VFIN's deposit share of total funding declined sharply to ~53% in FY26 (FY25: ~73%). The fixed deposit renewal ratio strengthened notably to ~92.6% in FY26 (FY25: ~81.0%). The ratio has remained strong, reflecting customer confidence and stability. Maturity profile improved, with a positive cumulative gap of LKR~7.19bn in the up-to-3-months bucket, reversing prior years' negative gaps. VFIN's core capital fell to ~10.8% in FY26 (FY25: ~16.5%),above the 10% regulatory minimum, while total capital declined to ~14.8% (FY25: ~21.5%). Debt-to-equity rose to 8.7x. In May 2026, the Company completed a rights issue raising ~LKR 2bn; following the issue, as of June 2026, Tier 1 capital rose to ~10.9% and total capital to ~15.7%.
Instrument Rating Considerations
About the Instrument
Vallibel Finance PLC has raised a listed, rated, subordinated, unsecured, redeemable debenture of LKR~3Bn. The initial issue was of LKR~2Bn with an option to issue up to a further LKR~1Bn (Total LKR~3Bn) in the event of an over subscription. The debenture has a tenor of 5 years. The issue has two types of debentures, namely Type 'A' and Type 'B' Debentures. The Coupon interest paid Bi-annually (Type A) and Annually (Type B).
Relative Seniority/Subordination of Instrument
The claims of the Debenture Holders shall, in the event of winding up of the Company, rank after all the claims of secured creditors and preferential claims under any Statutes governing the Company but pari passu to the claims of unsecured creditors of the Company. The claims shall rank in priority to and over any subordinated debt of the Company and the ordinary and preference shareholder/s of the Company.
Credit Enhancement
It is an unsecured and subordinate debt instrument. The capital repayment is made at the end of the tenor, with any interest accruing up to that time.
 
 

Sep-26

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Vallibel Finance PLC - LKR 3Bn Subordinated - Unsecured - Redeemable Debenture

rating analysis

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Sep-26

lra.com.lk

Vallibel Finance PLC - LKR 3Bn Subordinated - Unsecured - Redeemable Debenture

rating analysis

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Sep-26

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