Brown & Company PLC

ICRA Lanka assigns the Provisional [SL]A(CE) rating with Stable outlook to the proposed Guaranteed Redeemable Debenture Programme of Browns & Company PLC

InstrumentRated Amount (LKR Mn)Rating Action
Guaranteed Redeemable Debentures Programme5,000Provisional [SL]A(CE) with Stable outlook; assigned

Rating action

ICRA Lanka Limited has assigned the Provisional [SL]A(CE) (pronounced SL A Credit Enhancement) rating with Stable outlook to the proposed LKR 3,000 Million, with the option to increase up to LKR 5,000 Million, Guaranteed Senior Listed Redeemable Debenture Programme of Browns & Company PLC (BRWN 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.

The rating for the Guaranteed Senior Redeemable Debentures is based on the strength of the unconditional and irrevocable guarantee from LOLC Holdings PLC (LOLC) (rated [SL]A with Stable outlook by ICRA Lanka) 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 5,000 Million, being the total principal sum, and two yearly interest instalments of the proposed Guaranteed Senior Listed Redeemable Debentures. The rating also assumes that the guarantee will be duly invoked by the Trustee, as per the terms of the underlying trust deed and the guarantee agreement, in case there is a default in payment by BRWN (Issuer).

The Provisional rating is subject to the fulfilment of all conditions under the structure and review of all the final documentation pertaining to this transaction by ICRA Lanka.

About the Company:

Established in 1875, Brown and Company PLC started off as a mechanical engineering workshop and expanded into Automotive battery manufacturing and trading, agricultural and heavy equipment trading and vet pharmaceuticals segments over a time span of 146 years, through organic and inorganic expansion measures. The entity is presently a 83% owned subsidiary of LOLC Holdings. Since the acquisition of the Company by LOLC, the Company has been used as the vehicle to hold all the non-financial businesses/investments of the group, thus becoming a diversified conglomerate on its own. At stand-alone level, Browns & Company is primarily engaging in trading operations, where the company is a dominant player in product segments such as automotive batteries, agriculture heavy machinery, and vet pharmaceuticals.

Guarantor Profile:

LOLC Holdings PLC

Setup in 1980, LOLC Holdings PLC has evolved itself from a financial services provider to a holding company which also has interests in manufacturing, trading, plantations, leisure and energy. The group has diversified geographically into Cambodia, Myanmar, Indonesia, Pakistan, Maldives and in the African region.

During FY2021, LOLC Group reported a consolidated PAT of LKR 53.2Bn (including gains from disposal of subsidiary) on a total asset base of LKR 875Bn, compared to a consolidated PAT of LKR 19.8 Bn on a total asset base of LKR 1,336 Bn, in FY2020.

For the 6M ended September 30, 2021 the group reported a consolidated PAT of LKR 14.6 Bn on a total asset base of LKR 959 Bn.

Key financial indicators of LOLC Holdings PLC
In LKR MnFY2019FY2020FY20211HFY2022
Net Interest Income[1]53,90462,17440,01121,710
Profit after Tax19,63619,79253,196[2]14,641
Reported net worth152,220212,577235,268247,723
Loans and Advances707,278897,447423,787435,627
Total Assets1,043,7471,335,919874,944959,476
Return on Equity14.56%10.85%23.76%12.13%
Return on Assets2.10%1.66%4.81%3.19%
Gearing (times)5.55.02.52.6

Analysts

Sanduni Kankanamalage
+94-777478138
sanduni@icralanka.com  

Rasanga Weliwatte
+94-773553564
rasanga@icralanka.com

[1] Including discontinued operations

[2] PAT includes the capital gains from the PRASAC divestment in Q1FY2021


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