Financial Times

Senkadagala Finance debenture launched
By Duruthu Edirimuni
Senkadagala Finance last week launched its first ever debenture issue of Rs.250 million -- the debenture issue to be directly listed on the DEX trading platform of the Colombo Stock Exchange -- in a bid to help fund the expansion of its loan book and improve the asset-liability position.

Offering a fixed rate investment option at 14 percent per annum and a floating rate option at 2.75 percent above the three month treasury bill net rate, the issue opened on August 31 and closes on September 20.

While the period of investment is fixed for four years, 60 percent of the capital portion of the debenture will be paid back in the third year. The repayment pattern has been structured in this manner to match the maturity profile of the firm’s lease and hire purchase portfolio.

Senkadagala Finance recorded a portfolio growth of 53 percent during last year, supported by its branch expansion programme. Denzil Hettiarachchi, Area Manager, said the company expects a minimum of Rs.25 million a month from each of the new branches that they are going to open in Anuradhapura, Gampaha and Matara.

“The potential in these areas is so much that we are expecting in excess of Rs.75 million monthly from the new three branches that we are planning to open within the next two months,” he said.

Analysts said leasing companies are posting massive profits, because there is a huge demand for vehicles which is on the upward trend. “The vehicle prices have gone up, because of the high tax rates the vehicle importing companies have to pay and automatically the market has expanded due to price expansion,” an analyst explained.

He said the leasing companies are capitalising on this situation. “If a leasing firm leases one vehicle a day, it will make more than a million rupees and their profits reflect the demand for vehicles in the country,” he added. The company posted a profit of Rs. 95.6 million last year, compared to Rs.63 million in 2003, up by 48.2 percent.

Last year, the company’s asset quality improved with the non performing loans (NPL) to gross loans ratio falling to 2.5 percent as at March 2005 from 4.2 percent in March 2004. The solvency ratio, (net NPL to equity ratio) improved to 7.2 percent from 15.2 percent as at March 2004.

Overall, the company’s asset quality remains strong and healthy and is one of the best in the industry. Analysts said the debenture is an excellent trade off in the current economic environment, especially taking the present market fixed deposits and other investment instruments.

Hettiarachchi said the company did not see the present political climate in the country as a deterrent for the issue. “Whatever government comes into power will start new ventures and people will always look out for new investment opportunities in such a situation,” he said.

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