ICT

Sri Lanka’s Dialog Axiata ‘AAA(lka)’ rating confirmed

Tuesday March 16, 2021 10:17 am

ECONOMYNEXT – Fitch Ratings has confirmed an ‘AAA(lka)’ rating of Sri Lanka’s Dialog Axiata with a ‘stable outlook.

“Dialog’s Standalone Credit Profile (SCP) of ‘aaa(lka)’ is underpinned by its market leadership in the expanding mobile and pay-TV segments,” the rating agency said.

“We believe Dialog will continue to gain revenue market share, given its superior execution and mobile networks.”

Fitch said capital expenditure to revenue is expected to be around 30 percent in 2021 from 16 percent in 2020 as rising demand data drives 4G broadband growth.

“The company plans to expand 4G coverage to 95 -96 percent of the population, from 94 percent in 2020,” Fitch said.

“Some of the capex that was committed in 2020 is likely to spill over into 2021 due to import restrictions amid pandemic.”

Dialog revenue was expected to grow by mid single digits, with data growing amid falling profits in voice and data.

The full statement is reproduced below:

Fitch Affirms Sri Lanka’s Dialog Axiata at ‘AAA(lka)’; Outlook Stable
Mon 15 Mar, 2021 – 23:16 ET

Fitch Ratings – Singapore – 15 Mar 2021: Fitch Ratings has affirmed the National Long-Term Rating on Sri Lanka-based telecoms company Dialog Axiata PLC at ‘AAA(lka)’. The Outlook is Stable.

KEY RATING DRIVERS

Mobile-Market Leader: Dialog’s Standalone Credit Profile (SCP) of ‘aaa(lka)’ is underpinned by its market leadership in the expanding mobile and pay-TV segments. We believe Dialog will continue to gain revenue market share, given its superior execution and mobile networks. The company has a solid financial profile, with consistent revenue growth, a stable operating EBITDA margin and a low Fitch-forecast 2021 FFO net leverage of 0.4x-0.5x (2020 estimate: 0.5x).

Strong Revenue Growth: Based on unaudited reported results, revenue and EBITDA rose by 3% and 6%, respectively in 2020, before the operating lease adjustment under Sri-Lankan financial reporting standard 16. Dialog’s growth outperformed the GDP contraction of 5% in the nine months ending September 2020, amid the pandemic. Dialog increased its mobile subscribers by 9% yoy, its digital TV households by 12% yoy and home broadband subscribers by 45% yoy during 2020.

We forecast 2021 revenue to grow by a mid-single-digit percentage and EBITDA margin to remain stable at 38%-40%, as larger economies of scale in the data segment and cost savings offset falling profits in the voice and text segments. Stronger profitability will be supported by robust growth of data traffic and a likely price hike in the digital TV segment in 2021.

Potential Support from Parent: We believe Dialog could receive support from its 83% Malaysia-based parent, Axiata Group Berhad (Axiata), if its SCP were to weaken. We assess the relationship between Axiata and Dialog as one of ‘strong parent, weaker subsidiary and moderate linkages’ under our Parent and Subsidiary Linkage Criteria. The linkages include sharing key management personnel, a common name and common creditors, which could result in reputational risk to Axiata should Dialog fail.

Increase in Capex: We forecast 2021 cash capex/revenue to be around 30% (2020 estimate: 16%) to address rising demand for 4G network and broadband connectivity due to increased data demand, which was a trend even before the Covid-19 pandemic. The company plans to expand 4G coverage to 95%-96% of the population, from 94% in 2020. Some of the capex that was committed in 2020 is likely to spill over into 2021 due to import restrictions amid pandemic.

Positive FCF: We expect Dialog to generate an FCF margin of 2%-6% in 2021-2023, despite the increase in capex. This is because cash flow from operations is likely to increase due to strong EBITDA margin and stable working capital requirements, which will be sufficient to fund its large capex plan and dividend commitments. Dividends are likely to be around LKR5 billion-6 billion (2020 estimate: LKR4 billion).

Stable Sector Outlook: We expect mean FFO net leverage for Sri Lanka Telecom PLC (SLT, AA-(lka)/Stable) and Dialog to be stable at around 1.5x. We expect further sector consolidation, and believe Airtel Lanka, a subsidiary of Bharti Airtel Limited (BBB-/Negative), may seek M&A due to mobile competition and higher taxes amid capex needs. Airtel Lanka acquired the 900MHz spectrum that was surrendered when Etisalat Lanka and Hutch Lanka merged in 2018. We expect the telcos to focus on profitability, and price-based competition not to intensify.

We expect 2021 industry revenue to rise by 5%-7%, driven by a surge in data and fixed broadband, following lower growth of 2%-3% in 2020. Mobile data service revenue is likely to expand by 15%-20% (2020F: 25%-30%) on higher smartphone penetration and rising data consumption.

DERIVATION SUMMARY

Dialog’s business risk profile is stronger than that of similarly rated national peers, given its market-leading position in Sri Lanka’s mobile industry, stable cash generation, and integrated service offerings. Dialog’s financial profile is better than that of SLT, with a lower 2021 forecast FFO net leverage of 0.4x-0.5x (SLT’s 2021 forecast: 1.9x), a larger revenue base and a better operating EBITDA margin. Dialog has demonstrated better market execution than SLT, with expansion of its market share and EBITDA.

Dialog’s business risk profile is comparable to that of leading alcoholic-beverage manufacturer Melstacorp PLC (AAA(lka)/Stable). Melstacorp’s subsidiary, Distilleries Company of Sri Lanka (DIST: AAA(lka)/Stable), controls 70% of Sri Lanka’s spirits production, and has maintained its market leadership due to its entrenched brand and access to a country-wide distribution network. However, Dialog has higher ratings headroom – given its financial profile -than Melstacorp. Dialog’s forecast 2021 FFO net leverage of 0.4x-0.5x is lower than Melstacorp’s around 4.0x.

Hemas Holdings PLC (AAA(lka)/Stable) is the largest private pharmaceuticals distributor in the country, and has a presence in leisure and the fast-moving consumer goods (FMCG) sectors. Dialog has a significantly stronger business profile with its market-leading position, larger operating scale and ability to generate a wider operating EBITDA margin, and its ability to pass on higher taxes to consumers. Hemas’s ratings are constrained by regulatory pressures in the form of price controls in its pharmaceutical business. We forecast Hemas and Dialog to have similar net leverage ratios of 0.4x-0.5x in 2021.

KEY ASSUMPTIONS

Fitch’s Key Assumptions Within Our Rating Case for the Issuer

– Revenue to grow at 5%-7% in 2021-2023

– EBITDA margin to be stable at 38%-40%

– Capex/revenue to be around 30% in 2021 before declining to around 25%. Committed capex for 2020 was higher than cash capex of LKR19.5 billion as part of it will spill over into 2021. As such, capex is committed but will be paid in 2021.

– Effective tax rate of 15%

– Dividends of 45%-50% of previous year’s net income

– Annual equity injections of LKR500 million into Dialog Finance

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to positive rating action/upgrade:

– There is no scope for an upgrade, as Dialog is rated at the highest end on the Sri Lankan National Ratings scale.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

– We do not envisage any negative rating action in the medium term given the standalone strength of the business profile, low financial leverage and implied support from the stronger parent.

LIQUIDITY AND DEBT STRUCTURE

Adequate Liquidity: Dialog had sufficient unrestricted cash of LKR14 billion and undrawn committed bank facilities of LKR19 billion at end-2020 to cover the short-term debt maturities of about LKR21

The company has strong access to local banks, being among the largest corporates in Sri Lanka. Debt consisted mainly of a USD163 million syndicated facility, USD17 million trade facilities and a LKR7 billion bank term loan at end-2020.

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

Dialog’s SCP is ‘aaa(lka)’ and its National Rating therefore does not benefit from any support from its stronger parent, Axiata. However, Dialog’s rating will receive a notch of support from its parent if its SCP were to weaken.

Bonds & Forex

Sri Lanka rupee closes at 332.53/59 to US dollar spot, bond yields edge up

Monday November 9, 2026 5:05 pm

ECONOMYNEXT – Sri Lanka’s rupee closed at 332.53/59 to the US dollar spot on Monday, from 332.55/60 the previous day, while bond yields closed higher, dealers said.

A bond maturing on 15.09.2029 closed at 190/98 percent, up from 10.85/95 percent.

A bond maturing on 01.08.2030 closed at 11.07/12 percent, up from 11.05/10 percent.

A bond maturing on 01.02.2031 closed at 11.30/40 percent, up from 11.10/15 percent.

A bond maturing on 15.12.2032 closed at 11.65/70 percent, up from 11.55/65 percent.

A bond maturing on 01.11.2033 closed at 11.95/12.00 percent, up from 11.90/95 percent.

A bond maturing on 15.10.2034 closed at 12.10/15 percent, up from 12.05/12 percent.

A bond maturing on 15.08.2036 closed at 12.40/50 percent, up from 12.30/40 percent. (Colombo/Nov9/2026)

Markets

Sri Lanka stocks close up 1.37-pct, banks lead turnover

Monday November 9, 2026 3:29 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed up on Monday, CSE data showed, with the benchmark All Share Price Index moving up 1.37 percent.

The ASPI was up 291.72 points at 21,531.37, while the more liquid S&P SL20 was up 1.67 percent, or 100.96 points, at 6,146.34.

Positive contributors to the ASPI were Commercial Bank of Ceylon (up 2.86 percent at 216.00 rupees), Hatton National Bank (up 1.52 percent at 399.75 rupees), Asiri Hospital Holdings (up 12.86 percent at 31.60 rupees), Tokyo Cement Company (up 5.22 percent at 84.70 rupees), and Access Engineering (up 3.93 percent at 81.90 rupees).

Carson Cumberbatch (down 4.24 percent at 712.00 rupees), Richard Pieris and Company (down 2.43 percent at 28.10 rupees), LOLC Holdings (down 0.62 percent at 400.00 rupees), Renuka Holdings (down 2.63 percent at 37.00 rupees), and Chevron Lubricants Lanka (down 0.61 percent at 204.25 rupees) were top negative contributors.

Market turnover was 3.33 billion rupees. The S&P/CSE Banks Industry Group led turnover with 667.76 million rupees.

The session saw heavy crossings, according to Raynal Wickremeratne, Head of Research and Strategy at NDB Securities. Significant crossings included Keells (23 million rupees), Distilleries Company (27.7 million rupees), Sunshine Holdings (30.6 million rupees), Commercial Bank (32.4 million rupees), Ceylon Tobacco Company (35.6 million rupees), Hatton National Bank (39.5 million rupees), Prime Lands (40.5 million rupees), and HAS Holdings (41.5 million rupees).

In corporate news, Hayleys Retail Holdings Ltd announced it has partnered with supply chain software provider Blue Yonder to build and scale an AI-native grocery supermarket chain across Sri Lanka. (Colombo/Nov09/2026)

Information Technology

Sri Lanka’s Hayleys Retail to launch supermarket chain with Blue Yonder

Monday November 9, 2026 3:12 pm

ECONOMYNEXT — Hayleys Retail Holdings Ltd has selected supply chain software provider Blue Yonder to build its grocery retail operations from the ground up, the two companies said in a joint statement.

Hayleys Retail, a member of Sri Lanka’s diversified conglomerate Hayleys Group, plans to open several stores in the near future to serve consumers across the country. The agreement marks Blue Yonder’s first retail customer in Sri Lanka.

“Our entry into supermarket retail is about bringing that same commitment to quality and reliability closer to everyday Sri Lankan consumers,” Mohan Pandithage, Chairman and Chief Executive of Hayleys PLC said.

“With Blue Yonder, our teams will have AI-driven insight to deliver a seamless, consistent shopping experience across every store,” he said.

Hayleys, which accounts for approximately 5 percent of Sri Lanka’s export income and operates across 17 business sectors, is entering the large-scale supermarket space by drawing on its group strengths in manufacturing, logistics, and services.

The company selected Blue Yonder to connect its data across merchandising and shelf space, deploy artificial intelligence agents to catch operational issues early, and scale its business into a national network without changing platforms.

The rollout will begin with merchandise operations to manage suppliers, items, costs, and pricing, followed by machine learning capabilities to forecast demand and balance store inventory during seasonal peaks.

“Hayleys Retail is choosing one where AI is the foundation rather than an add-on—connected data and agentic AI built into core merchandising operations, and planning that learns as the business grows,” Antonio Boccalandro, President, APAC at Blue Yonder said.

The retailer plans to use the platform to automate routine store tasks and adjust inventory according to real-time sales and local market trends as its store footprint grows. (Colombo/Nov09/2026)

Stocks & Companies

Sri Lanka’s Citrus Leisure extends Lotus Tower management pact

Monday November 9, 2026 1:16 pm

ECONOMYNEXT – Sri Lanka listed hospitality firm Citrus Leisure said it has extended an agreement to manage consumer-facing and entertainment spaces at the Colombo Lotus Tower, which includes revolving restaurant Blue Orbit, until June next year.

The initial agreement signed between Citrus Leisure and Colombo Lotus Tower Management Company (Private) Limited (CLTMC) is due to expire on December 11.

“The Board of Directors of CLTMC at meeting held on 2nd November 2026 has resolved to extend the term of the Management Agreement and continue the existing Management Agreement until 30th June 2027, to which the company has given its concurrence,” the company said in a market filing.

Citrus Leisure Plc opened its revolving restaurant at the Lotus Tower in December 2023.

The company signed a 3-year agreement with CLTMC in May 2023 to provide services in the management of (l) the banquet hall 1 on the 25th floor, (2) the banquet hall 2 on the 26th floor, (3) the revolving restaurant on the 27th floor, (4) the 6 suites situated on the 28th floor and the kitchen in the basement floor of the Colombo Lotus Tower.

The 350-meter or 1,150-feet tower, the tallest in South Asia, was built at a cost 104.3 million US dollars with 80 percent of the money borrowed from Exim Bank of China.

Located in the commercial heart of Colombo, the tower has been called a symbolic landmark of Sri Lanka as well as a colossal white elephant and has been mired in controversy for years. (Colombo/Nov9/2026)

Markets

CIC Holdings Sept quarter net profit rises 20-pct to Rs1.7bn

Monday November 9, 2026 11:50 am

ECONOMYNEXT — Sri Lanka conglomerate CIC Holdings recorded a net profit of 1.66 billion rupees for the quarter ended September 30, rising 20.3 percent from 1.38 billion rupees in the same quarter last year, interim accounts showed.

The group posted basic earnings per share of 0.87 rupees for the September quarter, up from 0.73 rupees a year earlier.

Quarterly revenue grew 3.4 percent to 20.89 billion rupees from 20.20 billion rupees, supported by broad-based growth across industrial solutions, livestock, and healthcare segments, which counterbalanced relative demand moderation in agricultural inputs.

Cost of sales rose 5.3 percent to 15.20 billion rupees, outpacing revenue growth and causing gross profit to contract marginally by 1.2 percent to 5.68 billion rupees.

Results from operating activities dropped 7.3 percent to 2.66 billion rupees from 2.87 billion rupees, impacted by higher operating overheads.

Selling expenses expanded 6.8 percent to 2.15 billion rupees, and general and administrative expenses climbed 5.8 percent to 1.07 billion rupees, while other operating income dropped 29.6 percent to 117.40 million rupees.

However, operating profits were cushioned by an impairment reversal on trade receivables of 85.83 million rupees, turning around from an impairment provision of 23.38 million rupees in the corresponding quarter last year.

Net finance costs climbed 35.4 percent to 712.25 million rupees from 526.01 million rupees.

The increase was driven by a 30.8 percent rise in finance expenses to 771.46 million rupees, primarily reflecting higher interest expenses on loans to finance elevated working capital and inventory requirements.

The quarter’s bottom line was strongly bolstered by CIC’s equity-accounted investment in John Keells Holdings PLC (JKH).

Share of profit from equity-accounted investees surged more than fourfold to 590.50 million rupees from 257.87 million rupees, driven by JKH’s strong profit expansion during the period.

The group also recognized a gain on bargain purchase of 55.59 million rupees during the quarter resulting from additional share purchases in JKH where the proportionate net asset value exceeded acquisition cost, compared to no such gain a year earlier.

With associate income gains offsetting operating margin contraction and higher borrowing costs, group pre-tax profit held virtually flat at 2.59 billion rupees, down 0.11 percent.

Income tax expense fell 29.4 percent to 606.24 million rupees from 858.71 million rupees, driving total group profit for the period up 14.1 percent to 1.98 billion rupees.

Total group assets stood at 108.58 billion rupees as of September 30, up from 99.75 billion rupees at the end of March 2026.

Group net asset value per share increased to 25.52 rupees from 22.10 rupees a year earlier.

CIC Holdings’ ordinary voting shares closed at 27.80 rupees at the end of September.(Colombo/Nov09/2026)