Financial Times

LRA’s new rating to Asian Finance Limited
Lanka Research Agency (LRA) has assigned a long-term financial institution rating of BBB3 (with a stable outlook) and a short-term rating of L3 to Asian Finance Ltd which reflects the company’s growing profitability and improving asset quality, tempered by its borderline liquidity and marginal capitalisation.
Asian Finance, part of the Ceylinco Securities and Financial Services Group, is a mid-sized finance company with an asset base of Rs 1.69 billion as at the end of FY (financial year) 31 March 2005. It operates from Colombo, with branches in Kandy and Kurunegala.

The company’s business mainly focuses on leasing, hire-purchase financing and land easy-payment loans with real estate becoming increasingly important as a profit contributor over the last few years.

Asian Finance’s asset quality has shown considerable improvement since FY March 2003. Prior to that, bad debts had been accumulating in large amounts due to lack of credit control and monitoring, exacerbated by inadequate recovery efforts, LRA said.

Recognising its weaknesses, the company has revamped its credit-control procedures and monitoring mechanisms while establishing a separate recovery department.

These corrective actions have borne results and are reflected in Asian Finance’s healthier gross NPL ratio. Asian Finance’s internal cash-generating ability has been improving along with its better profit performance, which is expected to support its capitalisation level in the next few years.

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