ICRA LANKA UPGRADES ASIA ASSET FINANCE RATINGS
Wednesday, 16 Jun 2021

ICRA LANKA UPGRADES ASIA ASSET FINANCE RATINGS

16 May 2021 06:39 am

Asia Asset Finance PLC (AAFP) has gained stable outlook with resilience overcoming growth headwinds in Covid-19 environment, leading Credit Rating Agency ICRA Lanka Limited   affirmed.

It has revised the outlook of Asia Asset Finance to BBB+[Stable]. From BBB+(Negative) considering growth performance  with capital, operational, financial, and managerial support from  parent company Muthoot Finance Limited (MFL).

The outlook revision to “Stable” from “Negative” reflects the improvement of the parent entity’s rating and the additional support extended by the parent. As well as  the increase in exposure to asset backed lending, including gold loans.

Further, ICRA Lanka  noted that, the capital adequacy ratios of AAFP   remain adequate, buffer over minimum capital requirement (set by the CBSL) continues modest
 
Further, the Company is required to have a minimum core capital requirement of Rs 2.5 billion by January 2022, which is likely to be met through internal generation and capital infusion by the parent company, ICRA Lanka noted.
 
With  the company’s  solid Asset base and the continuous support  of MFL in regaining  glitter in  the gold loan business  has become more resilient in  the competition, thus expanding its gold loan base to Rs 6.5 billion,Chief Executive officer of Asia Asset Rajiv Gunawardena  said..  .  

.The company recorded tangible net worth of Rs 1,991 million and reported net worth of Rs 2,189 million respectively as of December 2020, which was close to minimum regulatory core capital requirement of Rs 2 billion by January 2021 he revealed.  

.The parent entity aims to provide a capital infusion of Rs 500 million in Q1 of FY 2022 followed by another capital infusion of Rs 300 million within the next year.
 
Going forward, with the expected expansion in the gold loan portfolio, AAF expects to further reduce the dependency on public funds and improve the long-term funding sources such as debentures, term loans from banks, and securitised borrowings.  
 
 ICRA Lanka  revealed that  AAFP  has a fairly diversified funding profile comprising of retail fixed deposits, debentures, term loans from banks, and securitised borrowings.

The funds from fixed deposits have moderated over the years with 50% of the funding base consisting of fixed deposits as in December 2020 in comparison to 52% in March 2020, 57% in March 2019.

 



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