Diversity in funding sources, attractive rate, big appetite from foreign funds major boost for biggest non-bank financial entity Plans Rs. 30 b borrowing program for FY14
Upbeat on outlook for economy and resultant demand for finance leasing
Giving a boost to its diversity in financing sources, People’s Leasing and Finance Plc has recently raised US$ 10 million from the Middle East under the External Commercial Borrowing Scheme introduced via the Government’s 2013 Budget.
The $ 10 million borrowing of one year tenure is from a leading bank based in the Middle East at LIBOR + 3.25% and PLC will use new funds to boost its working capital to enhance its growing lending portfolio.
The latest raising is part of a planned Rs. 30 billion fund raising for the 2013/14 Financial Year. Recently PLC successfully concluded the mega listed debenture of Rs. 6 billion.
The 2013 Budget relaxed exchange control restrictions whereby a corporate can borrow up to $ 10 million annually without prior approval. PLC was first corporate entity to make use of this opportunity whilst several banks have raised funds from offshore sources.
Whilst for PLC this is a first, previously it has obtained different foreign financing. Two other schemes being $ 10 million financing from the Asian Development Bank under a five year arrangement completion of which will be in June this year whilst the other is a $ 10 million credit line from India’s Export Import Bank (Exim Bank).
PLC’s Chief Executive Officer and General Manager D.P. Kumarage told the Daily FT that based on the strong balance sheet there has been strong appetite from international lenders and funds to support the Company’s future growth. The Middle Eastern bank has been introduced by PLC’s parent People’s Bank, which owns a 75% stake in the largest non-bank financial institution in the country.
“Our twin international ratings from global agencies (Fitch and S&P’s) which is unique for PLC also makes the company attractive for global financiers and investors,” Kumarage added. Ever since PLC listed on the Colombo Stock Exchange (CSE) with a mega Rs. 7 billion IPO in November 2011, the entity has been sought after by financiers and investment funds looking for new opportunities.
Kumarage said PLC had a good year in FY2013 with an asset growth of 6% and a low 1% Non Performing Ratio (PL) despite challenging market conditions. PLC is expected to release improved financial results for FY13 shortly. The recently raised Rs. 6 billion from listed debenture has helped it to retire some of the expensive old debt thereby further improving its balance sheet. This also helped PLC to become aggressive in the last quarter of FY13.
In March PLC issued 60 million senior, unsecured redeemable debentures of Rs. 100 each.
He said the Rs. 30 billion overall fund raising plan for FY14 was out of confidence of an upturn in the economy this year.
“PLC remains very optimistic of a rebound in leasing financing needs from corporates and several economic sectors,” Kumarage said, adding that construction, real estate, property development and tourism have shown signs of strong demand.
PLC has also stepped up plans for diversification to boost income with property development and leisure sectors identified as high potential avenues. Fleet management, Islamic banking, margin trading are some of the others whilst prospects for several of its subsidiaries have improved in recent years.
The Company also started accepting fixed deposits after it commenced commercial operations as a finance establishment on 5 December 2012.
People’s Insurance has rapidly grown to be fifth largest in general business whilst a bancassurance deal with parent People’s Bank along with expansion in to select popular commercial towns are expected further bolster the subsidiary’s prospects.
Overall PLC has diversified to include five subsidiaries, united under the PLC brand. Customers can now obtain insurance, finance, microfinance and fleet management services under one location.
In the first nine months of FY13, PLC Group revenue was up 20% to Rs. 13.6 billion whilst profit from operations before provision for taxation and possible losses was Rs. 4 billion, up by 3.5% over the corresponding period of last financial year.
Pre-tax profit was down by 38% to Rs. 3 billion whilst profit attributable to equity holders of the parent was down by 39% to Rs. 2 billion. As at 31 December 2012, PLC’s borrowings amounted to Rs. 27.4 billion whilst group assets amounted to Rs. 96.8 billion.
Full year results for FY13 when out is likely to show a much-improved performance, according to Kumarage.
PLC currently holds a stable outlook with international and local ratings. Ratings as of now stands at Fitch Ratings International (‘B+’ Rating); Standard & Poor’s (‘B+/B’ Rating) and Fitch Lanka ‘AA-(lka)’.