Prime Finance PLC

ICRA Lanka has put the issuer rating of Prime Finance PLC developing implications

CompanyInstrumentRated Amount (LKR Mn)Rating Action
Prime Finance PLCIssuer ratingN/A[SL]BBB-; rating put on watch with developing implications

Material Event:

On December 20, 2021, Prime Finance PLC (PRIM/ Company), made a disclosure to the CSE, announcing that the majority stake of PRIM is to be acquired by HNB Finance PLC (A; Stable by Fitch). HNB Finance PLC has entered into a trade to purchase from Prime Lands (Private) Limited (A-; Stable by ICRA Lanka), a total of 105,602,251 ordinary shares in PRIM, constituting 87.27% of the total number of shares in issue in the Company, at a price of LKR 20.10 per share. As in September 2021, Prime Finance PLC had 121 million ordinary shares outstanding, and Prime Lands (Private) Limited owned 87.27%. HNB Finance PLC has further announced that it intends to amalgamate with PRIM.

Rating Action:

In view of the above developments, ICRA Lanka Limited has put the issuer rating of Prime Finance PLC on Watch with Developing Implications.

Links to the previous detailed rationale: Prime Finance PLC

Links to applicable criteria: ICRA Lanka’s Issuer Rating Methodology; ICRA Lanka’s Credit Rating Methodology for Non – Banking Finance Companies.

About the Company:

Prime Finance PLC (PRIM), a registered finance company, is largely focusing on real estate backed loans and leasing. PRIM was established in 2004 as Asia Commerce Limited and was registered as a finance leasing establishment in 2005. In 2011, the Company was registered under the Finance Companies Act and was rebranded as Divasa Finance Limited. The Company went through a name change in 2012 as George Steuart Finance Limited and was listed on the Colombo Stock Exchange by way of an Introduction. Under the financial sector consolidation programme of the Central Bank of Sri Lanka, the Company was acquired by Sarvodaya Development Finance Limited (formerly known as Deshodaya Development Finance Company Ltd) in 2014 and changed the name of the Company to Summit Finance PLC in 2016. Prime Lands (Pvt) Ltd. acquired the Company in January 2017 and changed the name to Prime Finance PLC.

During the year ended March 31, 2021, PRIM reported a net profit of LKR 46 Mn on a total asset base of LKR 7,160 Mn as compared to the net profit of LKR 71 Mn on a total asset base of LKR 6,242 Mn in the previous fiscal year. For the six months ended September 30, 2021, PRIM reported a net profit of LKR 67 Mn (unaudited) on a total asset base of LKR 6,552 Mn.

Key financial indicators
FY19FY20FY211HFY22*
Net Interest Income539584426283
Profit after Tax179714667
Net worth (adjusted)[1]1,6211,6922,2642,331
Total Assets5,7066,2427,1606,552
Return on Equity15.99%4.31%2.32%5.82%
Return on Assets3.81%1.21%0.69%1.95%
Gross NPA5.52%21.17%20.21%20.18%
Net NPA0.32%10.96%5.23%4.63%
Gearing2.372.461.981.65
*Unaudited    
Rating history for last three years:
Analysts
Sanduni Kankanamalage
+94-777478138
sanduni@icralanka.com  

Rasanga Weliwatte
+94-773553564
rasanga@icralanka.com

[1] Networth = Total Equity-Revaluation – Goodwill


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