Sri Lanka's Multi Finance Company Limited (MFCL) has been assigned a National Long-Term Rating "B+(lka)" with stable outlook by ratings agency Fitch. The ratings report revealed this was due to "its small size relative to its local sector peers; a weak franchise; modest capitalisation; and low profitability in its core business. The rating factors in MFCL’s rapid loan growth since its takeover by Entrust Limited (Entrust) in March 2008, and the improved product diversity which resulted from this."
Also noted; "The rating may face downward pressure from any significant structural change in MFCL’s balance sheet which could impede future profitability — due, among other things, to its potential merger with [The Standard Credit Lanka Limited]. A significant and sustained weakening in liquidity or capitalisation below that of its peers, could also have a negative rating impact. Conversely, an increase in MFCL’s scale of operations without a significant compromise on asset quality, as well as a sustained improvement in core profitability, could result in a ratings upgrade."
MFCL is majority owned by holding company Entrust Limited, formerly Ceylinco Shriram Securities Holdings Limited, which was bought over by investor consortium owned Pacific Trust (Pvt) Ltd in 2011. Entrust is also the Central Bank appointed managing agent for The Standard Credit Lanka Limited, formerly failed Ceylinco Registered Finance Company (RFC) Ceylinco Investments and Realty Company Limited. A March 2011 Memorandum of Understanding between Entrust and the latter has put forward an intended takeover at which time its real estate holdings and other assets will come under MFCL's portfolio.