Finance

Fitch affirms Asia Asset Finance at ‘A+(lka)’

Friday February 28, 2025 5:30 pm

ECONOMYNEXT – Sri Lanka-based Asia Asset Finance PLC’s (AAF) national long-term rating of ‘A+(lka)’ with a stable outlook has been affirmed by Fitch Ratings.

Fitch also affirmed AAF’s secured and senior unsecured debentures at ‘A+(lka).

AAF’s rating is driven by expectation that its parent, India-based Muthoot Finance Ltd (MFL, BB/Stable), would provide extraordinary support if required, the rating agency said.

“We expect the operating environment for Sri Lankan finance and leasing companies to continue to stabilise following the inflation and interest-rate shocks over the past two years. Easing inflation and interest-rate pressure should create steadier conditions for sector performance,” Fitch said.

The full statement is reproduced below:

Fitch Affirms Asia Asset Finance at ‘A+(lka)’; Outlook Stable

Fitch Ratings – Colombo/Mumbai – 28 Feb 2025: Fitch Ratings has affirmed Sri Lanka-based Asia Asset Finance PLC’s (AAF) National Long-Term Rating of ‘A+(lka)’ with a Stable Outlook. Fitch also affirmed AAF’s secured (asset backed) and senior unsecured debentures at ‘A+(lka).

Key Rating Drivers

Support-Driven Rating: AAF’s rating is driven by our expectation that its parent, India-based Muthoot Finance Ltd (MFL, BB/Stable), would provide extraordinary support if required. MFL’s ability to support AAF is underpinned by its standalone profile as India’s largest gold-backed lender, proven execution record and considerable resources relative to AAF’s balance sheet. Our support assessment also takes into account MFL’s 72.9% shareholding of AAF, record of ordinary equity support and the strategic and operational alignment between the parent and subsidiary in their core product – gold-backed loans.

Limited Subsidiary Role: AAF’s rating is constrained by its minor role and low contribution to MFL group. It accounts for less than 1% of the group’s assets and net profit, operates in a different geography and regulatory environment and exhibited volatile performance amid Sri Lanka’s recent economic challenges. We regard AAF as less critical to MFL than the parent’s other financing subsidiaries in India.

Product and Strategy Integration: AAF’s aligns its business model with MFL’s core product of gold-backed loans, which comprised around 70% of AAF’s net loans in the third quarter of the financial year ending March 2025 (3QFY25). We expect gold-backed loans to remain central to AAF’s operations, even as it seeks to diversify its product mix. MFL provides input on AAF’s strategy and execution through representation on AAF’s board and the secondment of four executives to AAF. However, execution differences remain, due to the companies’ distinct jurisdictions and local market practices.

Record of Ordinary Capital Support: MFL has provided timely and sufficient ordinary capital to AAF when needed since its acquisition in 2014. Total capital support has exceeded LKR800 million to facilitate AAF’s business growth and meet increased minimum regulatory capital requirements.

Weak Standalone Profile: We assess AAF’s standalone credit profile to be weaker than its support-driven rating, due to its modest franchise, at 1.8% of finance and leasing sector assets and deposits, and high debt/tangible equity ratio (end-3QFY25: 7.7x, FYE24: 6.5x), while exhibiting a higher-risk appetite. The company’s delinquency ratio also exceeds the sector average, due to the significantly higher non-performing loans in its legacy non-gold loan book.

Stabilising Economic Outlook: We expect the operating environment for Sri Lankan finance and leasing companies to continue to stabilise following the inflation and interest-rate shocks over the past two years. Easing inflation and interest-rate pressure should create steadier conditions for sector performance. Sri Lanka’s economy expanded by 5.2% in the year to September 2024, from a contraction of 4.5% in the year to September 2023. We expect domestic economic activity to keep improving as GDP expands.

Expanding Franchise: AAF’s market share has steadily increased since FY21, despite challenging operating conditions; its market share, measured by total assets, reached 1.8% in 2QFY25, from 1.1% at end-FY21. This was led by a surge in gold-backed lending and, more recently, the expansion of micro-mortgage loans against residential property, which also helped to moderate the concentration risk stemming from gold-backed lending.

Improving Profitability: AAF’s annualised pre-tax return on assets rose to 3.0% in 9MFY25 (FY24: 1.9%), driven by reduced funding costs, as short-term deposits repriced downwards more quickly than loan receivables amid declining market interest rates. Profitability was also supported by increased business volume on improving credit demand, which boosted interest and other income.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

AAF’s rating is sensitive to changes in MFL’s credit profile as well as Fitch’s assessment of the parent’s ability and propensity to extend timely extraordinary support. Developments that could lead to negative rating action and potentially a multiple-notch downgrade include:

— Significant reduction in the parent’s ownership, control or influence that could weaken its propensity to support AAF

— Weakening alignment of AAF’s gold-loan practices with its parent’s policies, signifying reduced integration

— Weakening performance or meaningful deviation on strategy that suggests AAF may no longer meet MFL’s objectives for the subsidiary on a sustained basis

— A notable decline in AAF’s capital buffers, indicating reduced timeliness in providing extraordinary support

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

— An enhanced strategic importance for AAF within MFL group, including a meaningful increase in asset and profit contribution

— Significant increase in integration with MFL across various functional areas that suggests an enhanced role and relevance for AAF

— Expanded use of the Muthoot brand name beyond the gold-loan product that significantly increases reputational risk to MFL in the case of AAF’s default

However, we do not expect major near-term developments in these aspects in light of AAF’s small size relative to MFL and its operation in a different jurisdiction.

DEBT AND OTHER INSTRUMENT RATINGS: KEY RATING DRIVERS

AAF’s secured (asset backed) debentures are rated at the same level as its National Long-Term Rating in accordance with our criteria. This is because the secured debenture holders rank higher in priority to all other unsecured creditors and any preference and ordinary shareholders of the company. We have not provided any rating uplift for the asset-backed securities, as we assess recovery prospects as average and comparable to those of AAF’s unsecured debt under Sri Lanka’s developing legal system. A default by AAF would constitute an event of default on the debentures.

AAF’s senior unsecured debentures are rated at the same level as its National Long-Term Rating, as they constitute its direct, unconditional, unsecured and unsubordinated obligations.

DEBT AND OTHER INSTRUMENT RATINGS: RATING SENSITIVITIES

The debt ratings will move in tandem with any rating action on AAF’s National Long-Term Rating.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

Public Ratings with Credit Linkage to other ratings

AAF’s National Long-Term Rating is linked to MFL’s credit profile, taking into account relativities with other entities rated on the Sri Lankan national rating scale.

ESG Considerations

Not applicable.
(Colombo/Feb28/2025)

Markets

Sri Lanka stocks close down 0.60-pct, dragged by HNB and LOLC

Friday November 13, 2026 3:28 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed down on Friday, CSE data showed, with the benchmark All Share Price Index moving down 0.60 percent.

The ASPI was down 133.22 points at 22,024.18, while the more liquid S&P SL20 was down 1.06 percent, or 67.55 points, at 6,298.02.

The ASPI ended the week up 784.53 points from last Friday.

Positive contributors to the ASPI were Dialog Axiata (up 0.40 percent at 50.20 rupees), Distilleries Company of Sri Lanka (up 0.52 percent at 58.30 rupees), Aitken Spence (up 3.60 percent at 151.00 rupees), Ceylon Tobacco Company (up 1.05 percent at 1,828.50 rupees), and LOLC Finance (up 1.96 percent at 5.20 rupees).

Hatton National Bank (down 1.88 percent at 403.75 rupees), Richard Pieris and Company (down 6.21 percent at 27.20 rupees), LOLC Holdings (down 2.17 percent at 405.00 rupees), Sampath Bank (down 1.91 percent at 154.00 rupees), and Singer (Sri Lanka) (down 2.40 percent at 77.30 rupees) were top negative contributors.

Market turnover was 3.23 billion rupees. Capital goods led turnover with 869.21 million rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka MP slams budget speech for omitting Tamil national question

Friday November 13, 2026 2:56 pm

ECONOMYNEXT – A Sri Lanka legislator has voiced strong disappointment that the President’s budget speech failed to make a single mention of the Tamil national question.

“It is very unfortunate that in His Excellency the President’s speech, there has not been a single word mentioned about the Tamil national question. Not a single word,” Shanakiyan Rasamanickam said.

“A budget speech generally, is a policy direction of the government for the next year. The budget speech is not only a statement of the country’s fiscal position or the economy’s position. It is the country’s, the government’s, plan, or what the government plans to do the following year. That’s a policy statement.”

Former presidents would at least mention the Tamil question even if it was not resolved, he said.

Former President Ranil Wickremesinghe in his speech, in his policy statement, he would mention: “The Tamil national question must be resolved,” Rasamanickam said.

Former Presidents Maithripala Sirisena and Gotabaya Rajapaksa also mentioned that the national ethnic question must be resolved, he added.

“Every President, every country’s Head of State, in their policy statements, have acknowledged the fact that there is an unresolved national issue, the Tamil national question, that it needs to be resolved. Various governments have proposed various mechanisms; none of them have succeeded, but at least it was mentioned.”

This year’s budget made allocations for the Office of Missing Persons, and the Office of Reparations.

“But the domestic mechanism is a mechanism that the victim community has rejected. So you all are allocating money to a mechanism where the victim community is not going to be part of.”

Last year’s budget 1 billion was allocated to be spent on the Trincomalee and Jaffna airports.

“Where was that 1 billion for the Trincomalee and Jaffna airports spent last year?”

“The trajectory of this government, Honourable Deputy Speaker, is worrying to me. It’s really worrying to me. Because if the objective is to say that there is no Tamil national question, if the objective is to say that you all have resolved any ethnic issue that this country faced, then Honourable Deputy Speaker, then I think the Tamil people will teach this government a very, very, very harsh lesson in the future.” (Colombo/Nov13/2026)

Bonds & Forex

Sri Lanka sells extra Rs6.5bn Treasury bills after auction

Friday November 13, 2026 12:32 pm

ECONOMYNEXT – Sri Lanka has sold 6,500 million rupees of treasury bills offered on tap at an average rate of 9.95 percent, the public debt management office said, bringing the total of bills sold in the week to 85.562 billion rupees.

The issue offered 90 billion.

Total market subscription was 6.5 billion rupees.

The debt office sold a 12-month bill at 9.95 percent.

On Wednesday (11) the debt office raised 79 billion rupees of 3, 6 and 12 month bills after offering 90 billion.

The settlement date is November 13. (Colombo/Nov13/2026)

Construction and Real Estate

Access Engineering Sept quarter group net profit surges 200-pct to Rs4.75bn

Friday November 13, 2026 12:15 pm

ECONOMYNEXT — Sri Lanka’s Access Engineering PLC recorded a group net profit attributable to equity holders of Rs. 4.75 billion for the quarter ended September 30, surging 200 percent from Rs. 1.58 billion a year earlier, interim accounts showed.

Basic earnings per share rose to Rs. 4.08 for the September quarter, up from Rs. 1.58 previously.

Quarterly group revenue expanded 36 percent to Rs. 20.39 billion from Rs. 14.94 billion, underpinned by condominium property handovers — reflected in inventories dropping Rs. 7.69 billion since March to Rs. 35.71 billion — alongside strong automobile sales and steady civil engineering execution.

Cost of sales rose at a slower 27 percent to Rs. 14.34 billion, lifting gross profit by 64 percent to Rs. 6.05 billion and expanding gross margins to 29.7 percent from 24.7 percent.

Other income jumped 144 percent to Rs. 259.9 million, while administrative expenses rose 75 percent to Rs. 1.14 billion, leaving operating profit up 64 percent at Rs. 5.16 billion.

However, finance costs more than doubled, rising 107 percent to Rs. 1.18 billion on elevated group borrowings of Rs. 43.74 billion, partly offset by finance income climbing 302 percent to Rs. 42.2 million.

Share of results from equity-accounted investees rose 122 percent to Rs. 26.7 million, pushing pre-tax profit up 56 percent to Rs. 4.05 billion.

Income tax swung to a net reversal of Rs. 186.6 million from an expense of Rs. 804.1 million, boosted by deferred tax assets on unrelieved losses from a 100 percent enhanced capital allowance claimed by 60 percent-owned radiopharmaceutical subsidiary Access Medical Tracers (Private) Limited.

Total period profit rose 136 percent to Rs. 4.24 billion, with non-controlling interest declining 24 percent to Rs. 164.9 million following last year’s buyout of minority shareholders in Harbour Village (Private) Limited.

No separate exchange gain or loss was itemized in quarterly earnings, though foreign currency translation via associates recorded a Rs. 17.4 million loss in other comprehensive income, alongside USD 16.6 million in corporate guarantees.

Notes also flagged an expected Rs. 1.45 billion recovery from the terminated South Asia Commercial and Logistics Hub project, a Rs. 225 million post-quarter legal settlement already provided for, and a Supreme Court appeal over a 2011/12 PAYE tax ruling.

Group assets stood at Rs. 132.4 billion as of September 30, with net asset value per share at Rs. 46.70, as the Employees’ Provident Fund raised its stake to 5.69 percent.

Access Engineering shares closed at 80.00 rupees at the end of September and are currently trading around 85.80 rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka private sector says timely implementation of Budget 2027 key

Friday November 13, 2026 11:43 am

ECONOMYNEXT – Private sector body, The Ceylon Chamber of Commerce, said it was encouraged by the broad direction of Budget 2027, noting that it reinforces Sri Lanka’s commitment to economic transformation while maintaining policy continuity, macroeconomic stability, and fiscal discipline.

“This continuity is particularly important as the country seeks to transition from economic stabilisation to a more durable, investment-led growth trajectory.”

The chamber also noted several areas where the Budget could have placed greater emphasis to strengthen the country’s growth prospects.

“In particular, there is a need for a stronger focus on attracting Foreign Direct Investment (FDI), accelerating factor market reforms, particularly in land and labour, and fast-tracking public procurement reforms to improve the efficiency and speed of project implementation.

“More targeted and actionable proposals could have been introduced to unlock the potential of sectors with significant growth opportunities, including tourism, agriculture, IT/BPO and logistics.”

The chamber said the budget contains positive measures aimed at enhancing competitiveness, and external sector resilience, while presenting opportunities for focus on sectors that can accelerate growth.

“A number of the key structural reforms identified in last year’s Budget have been carried forward and strengthened, providing greater certainty and predictability to businesses and investors.

“These include the continued implementation of the Trade National Single Window (TNSW), the phased removal of para-tariffs, the rollout of the Digital ID framework, efforts to expand market access through new Free Trade Agreements (FTAs), the strengthening of one-stop-shop investment facilitation mechanisms, progress on Customs reforms, the expansion of Bandaranaike International Airport (BIA), enhanced financing support for SMEs, and reforms relating to the management of State-Owned Enterprises.”

The CCC said that more than 20 proposals submitted by it have been reflected in Budget 2027.

These include measures to strengthen investor facilitation through the establishment of a professionally managed investment promotion agency; continued efforts to improve trade facilitation and export competitiveness; the Government’s consideration of a successor programme with the International Monetary Fund (IMF); accelerated progress on key legislative reforms; the expansion of digital government services; and the promotion of cashless payments and broader digital adoption. The Budget has also captured several priorities relating to energy security, including the accelerated deployment of Battery Energy Storage Systems (BESS) and investments in fuel storage infrastructure, initiatives to optimize underutilized agricultural land, measures to support the expansion of the digital economy and the IT/BPO sector, and tax reforms to support exporters, including the acceptance of newly VAT-registered exporters as eligible exporters.

“The inclusion of these priorities reflects the value of sustained public-private dialogue and demonstrates increasing alignment between national policy objectives and the needs of a competitive, export-oriented economy.

“The priority now must be effective and timely implementation to translate policy commitments into investment, competitiveness, exports and sustainable growth.” (Colombo/Nov13/2026)