Fitch affirms Lanka ORIX Finance Co rating

Fitch Ratings Lanka has affirmed Lanka ORIX Finance Company Ltd's (LOFIN) National Long-term rating at 'BBB+ (lka)'. Fitch said the LOLC group restructuring in mid-2007 resulted in LOFIN's operations being integrated in the overall LOLC group. In addition to sharing a common customer and brand franchise, the company benefits from the operational synergies of integration.

The company has been expanding rapidly since inception (compounded annual growth rate of 130% in the period FYE03-FYE07). The loan book was dominated by vehicle finance to the higher-end of the sub prime market (via leases and hire purchase agreements), which accounted for 54% of LOFIN's loan portfolio at FYE07 (74% at FYE06).

The decrease in its share of vehicle finance was due to LOFIN purchasing working capital loans from a group company in FY07, raising the share of loans to 35% of the loan book at FYE07 (8% at FYE06). The remainder of the loan portfolio consisted of microleasing, margin trading and pawn brokering.