TKS Finance correction

Friday, 9 November 2018 00:00 - - {{hitsCtrl.values.hits}}

The article titled ‘ICRA Lanka assigns B- rating for TKS Finance’ on the 1 November issue of the Daily FT contained some outdated information. Below we reproduce the relevant updated information whilst the rest of the story remains unchanged.

The rating considers TKS’s modest scale and franchise, weak asset quality indicators, poor earnings and constrained resource profile. ICRA Lanka takes note that the company is under CBSL’s restriction on borrowings (deposit and other borrowings caps at Rs. 4.9 billion and Rs. 123 million respectively) since January-18 and lending since June-18, due to non-compliance of the minimum core capital requirement. TKS’s core capital as in June 2018 stood at about Rs. 0.7 billion, below the regulatory requirement of Rs. 1 billion for Licenced Finance Companies (LFCs).

Further, TKS’s total capital adequacy ratio at 6.2% as of Jul-18 was below the regulatory requirement of 10% and the gearing stood high at 8.8 times as of June-18. ICRA Lanka notes that sizeable further external capital infusion (about Rs. 2.0-2.5 billion over the period FY2019-FY2021) would be required as internal generation is likely to remain modest. Going forward, timely capital infusion will be crucial to meet the regulatory capital requirement.