Senkadagala Finance receives AAA rating

One of the leading finance company Senkadagala Finance (SF) has become the first entity to be rated as the A3 by Lanka Rating Agency.

At present SF carries a BBB+ (Sri) rating from Fitch Ratings Lanka Ltd, a unit of Fitch Inc of USA. An A3 rating denotes capacity to honor timely payments, but the firm is vulnerable to future risks, explains Lanka Ratings in a statement Tuesday.

"The ratings reflect SF's commendable asset quality, above-average profitability, satisfactory liquidity and sturdy capitalisation," Lanka Ratings said, while assigning a stable outlook.

SF Chief Executive Lakshman Balasuriya says the situation would be rectified once the firm steps up promoting its savings products.

Balasuriya says SF has finalised plans with licenseholders of Master Card and Cirrus network to mobilise low cost deposits. "Nearly all leading commercial banks are running off these systems. We will issue an ATM (automatic teller machine) to savings accountholders, which can also be used as a debit card for any purchases," he said.

However, Balasuriya has no immediate plans to raise funds using its dual ratings.

"Nobody (banks) has ever turned us down for a facility. But the rates offered are still high; the same as what was offered us before we got a rating. The credit rating has not made much of a difference to us," he adds.

The finance company was set up in 1968, it's core business lies in leasing and offering higher purchase schemes to motor vehicles.

The firm operates out of nine branches, all linked via online real-time network, which facilitates centralised monitoring and control.

Despite its astute management, the finance company still lacks a formal system for strategic planning and budgetary control warns Lanka Ratings.

"There is also room for a written underwriting policy which would ensure the preservation of SF's profitability and asset quality," says Lanka Ratings.

SF also leans heavily on bank borrowings and securitsation to raise long term funds.

As at end 2004, SF's borrowing stood at around two billion rupees and the firm plans to raise around Rs. 850 million in the coming months by securitising its leasing portfolio.

Though these loans offer better maturity structure, they are short-term.

"They (Senkadagala) have to look at deposit mobilisation seriously," says Lanka Ratings analyst said.