Commercial Credit and Finance PLC

ICRA Lanka assigns [SL]AA(CE) rating with Stable outlook to the proposed Guaranteed Redeemable Debentures Programme of Commercial Credit and Finance PLC

InstrumentRated Amount (LKR Mn)Rating Action
Guaranteed Redeemable Debentures Programme2,000[SL]AA(CE) with Stable outlook; assigned
Issuer ratingN/A[SL]BBB with Negative outlook; outstanding
Commercial Paper Programme1,000[SL]A3; outstanding
Listed Guaranteed Subordinated Redeemable Debentures Programme2,000[SL]A+ (SO) with Stable outlook; withdrawn

Rating action

ICRA Lanka has assigned the issue rating of [SL]AA (CE) (pronounced SL double A Credit Enhancement) with Stable outlook to the proposed LKR 2,000 Million Guaranteed Senior Redeemable Debentures Programme of Commercial Credit and Finance PLC (CCFL or the Company). The letters CE in parenthesis suffixed to a rating symbol stand for Credit Enhancement. A CE rating is specific to the rated issue, its terms, and its structure. The CE ratings do not represent ICRA Lanka’s opinion on the general credit quality of the issuers concerned. ICRA Lanka has the issuer rating of [SL]BBB (pronounced SL triple B) with Negative outlook on CCFL.

The rating for the Guaranteed Senior Redeemable Debentures is based on the strength of the unconditional and irrevocable guarantee from Hatton National Bank PLC (HNB) covering the principal and two interest instalments (annual) of the proposed issue. The guarantor undertakes the obligation to pay, on demand from the Trustee, LKR 2,000 Million, being the total principal sum, and two yearly interest instalments of the proposed Senior Redeemable Debentures. The rating also assumes that the guarantees will be duly invoked by the Trustee, as per the terms of the underlying trust deed and guarantee agreements, in case there is a default in payment by CCFL (Issuer).

ICRA Lanka has also withdrawn the issue rating of [SL]A+(SO) (pronounced SL A plus Credit Enhancement) with Stable outlook on the LKR 2,000 Million Guaranteed Senior Redeemable Debentures Programme, as the said debentures are redeemed by the company.

Please refer to ICRA Lanka Rationale dated August 28, 2020 on the issuer for more details on the issuer.

About the Company:

CCFL, a registered finance company, offers leasing, hire purchase, business credit facilities, microfinance, factoring, term loans and other personal loans apart from accepting deposits (fixed and savings). The Company was established in 1982 as a specialized leasing company in Kandy. In October 2009, BG Investments (Pvt) Ltd. acquired the controlling stake of the Company. Since the change of ownership, the Company has rapidly expanded its service locations to about 118 from about 22 in FY2012. The Company has an employee base of about 2,800. CCFL’s shares were listed on the Dirisavi Board (secondary board) of the CSE in June 2011. The Company witnessed investments from the impact investor, Creation Investment Sri Lanka LLC in March 2014 and regional NBFI, Group Lease Holdings Pte Ltd in December 2016. As of March 2019, BG Investment (Pvt) Ltd held 50.25% of the shares, while Group Lease Holdings Pte Ltd. held 29.99%, Creation Investments owned about 8.67%. During FY2015, the Company acquired the majority stake in Trade Finance and Investments PLC, and subsequently in November 2020, the Company has passed a resolution to amalgamate the subsidiary with CCFL.

During the financial year ended March 31, 2020, CCFL reported a net profit of LKR 1,664 Mn on a total asset base of LKR 80.3 Bn, compared to the net profit of LKR 2,078 Mn on a total asset base of LKR 80.1 Bn during the financial year ended March 31, 2019.

For the 6M ended September 30, 2020, CCFL reported a net profit of LKR 516 Mn on a total asset base of LKR 79.6 Bn, compared to the net profit of LKR 801 Mn on a total asset base of LKR 80.3 Bn during the same period, previous fiscal.

Guarantor Profile:

Hatton National Bank PLC

Hatton National Bank PLC (HNB) is one of the larger private sector commercial banks in the country with total assets amounting to LKR 1,248 Bn as at September 30, 2020. The Bank was incorporated in the present form in the year 1970. Stassen’s group with 17.8%, Sri Lanka Insurance Corporation Ltd, with 12.7% and Employee Provident Fund with 9.8% stake, are the major shareholders of the Bank. During CY2019, HNB reported a PAT of LKR 14 Bn on a total asset base of LKR 1,125 Bn, compared to a PAT of LKR 15.5 Bn on a total asset base of LKR 1,086 Bn in CY2018. For the 9M ended September 30, 2020, the Bank reported a PAT of LKR 7.7 Bn on a total asset base of LKR 1,248 Bn. The Bank witnessed a slight moderation of NIM during CY2019, to about 4.45% from about 4.66% in CY2018. The same has further moderated to about 3.80% during the 9MCY2020. Overall profitability has also moderated during the period with ROA (PAT/ATA) declining from about 1.52% in CY2018 to 1.27% in CY2019 and 0.87% in 9MCY2020. Gross NPA has witnessed a sharp increase during the same period, from about 2.78% in December 2018 to 5.91% in December 2019 and 6.51% in September 2020.

Key financial indicators of CCFL
Net Interest Income10,83510,8569,3734,386
Profit after Tax2,3512,0791,664516
Reported net worth 12,263 11,987 13,31713,833
Loans and Advances66,90560,85561,61559,097
Total Assets83,79380,11180,36079,607
Return on Equity20.9%17.1%13.2%7.6%
Return on Assets[1]2.8%2.5%2.1%1.35%
Gross NPA ratio7.0%6.5%9.9%9.3%
Net NPA ratio (based on IFRS provisioning)1.6%-0.4%2.5%0.2%
Core CAR13.0%13.0%14.1%13.7%
Adjusted Gearing (times)[2]
Rating history for the last three years:


Rasanga Weliwatte
Head of Finance Sector Ratings

[1] Return on Assets: PAT/ Average Total Assets

[2] Gearing adjusted for revaluation reserves and deferred tax assets


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