Rating type: Entity (Sept 21, 2022)
Action: Initial
Long term: BB
Outlook: Stable
Rating Watch: -
Lanka Rating Agency (LRA) has assigned Sarvodaya Development Finance PLC (SDF) with an Initial Entity Rating recognising stable growth.
The rating reflects the stable growth SDF has experienced in the past five years and its accessibility to the rural sector through the Sarvodaya Movement.
The Company, while having access to Small and Medium Enterprises (SMEs) and the rural sector, also faces the risk of the current economic turmoil in the country affecting a large portion of its customer base.
SDF has been successfully maintaining its gross Non-Performing Loan (NPL) ratio below industry levels since FY21.
However, the current economic conditions have impacted its gross NPL levels to increase from 8.9% as of FY22 to 10.8% as of 1QFY23.
Steady growth is observed in the Company since SDF earned an interest income of Rs. 1.8 bn and profit-after-tax of Rs. 215 mn in FY22, which is a 15% and 18% growth.
Ratings reflect the company’s small industry position given its share of 0.9% in the leasing industry.
Recently, the company has significantly increased its leasing portfolio which leads to an Advance to Funding ratio of over 150% which amplifies the risk.
The rating is dependent on the Company’s ability to confront the volatile macroeconomic climate persistent in the country and sustain its position.