Ratings agency RAM has upheld its long term "BB-," with stable outlook, and short term "NP" financial institution ratings for Associated Motor Finance PLC (AMF), a family-operated Sri Lankan Registered Finance Company (RFC) incorporated in 1962.
According to RAM, the rating is supported by "AMF’s healthy profitability, good asset quality and capitalisation" while, at the same time, also being constrained by the "company's small size and concentration in motorcycle financing, a segment which is highly vulnerable to changes in the economic climate."
Noting that AMF was still one of the smallest players in the local RFC industry, with 0.35% of total industry assets, even despite a "relatively long operating history," as well as its lack of branch network, with the entire operation working out of a sole, Colombo-based office, RAM also signalled that AMF's core business of motorcycle financing was "relatively high-risk segment" as well as being "highly susceptible to economic downturns." Also indicated, this segment accounted for "96.82% of AMF’s credit portfolio as at end-June 2011" with the company said to be holding "around 7% of the motorcycle financing market."
However, RAM also suggested that, despite its lack of a branch network, AMF "enjoys support from its loyal dealer base, which brings in new loan applications and supports collections and recoveries." And that the company has maintained the "quality of its portfolio at healthy levels relative to its peers, who usually experience high delinquencies in motorcycle financing."
RAM had also deemed both AMF's funding and liquidity as "adequate" while its performance was identified as being "healthy" as witnessed by pre-tax profits improving to Rs 81.09 million in the Financial Year Ending end-March 2011, equal to 93.5% year on year growth.