October, 11, 2017
The issuer rating of SL[A-] with stable outlook was reaffirmed for First Capital Holdings PLC (First Capital) by ICRA Lanka Limited, a subsidiary of ICRA Limited, a group company of Moody’s Investors Service. ICRA Lanka also reaffirmed the issuer rating [SL]A- with stable outlook for First Capital’s standalone primary dealer First Capital Treasuries PLC.
First Capital Holdings PLC is also the holding company for other entities in the financial services space, engaged in making investments and managing its subsidiaries i.e. First Capital Treasuries PLC an authorised Primary Dealer in Government Securities, First Capital Limited involved in structuring and placement of corporate debt and corporate finance advisory services and investments, First Capital Asset Management Limited involved in unit trust and portfolio management; First Capital Markets Limited involved in providing margin trading facilities and dealing and broking of listed debts, First Capital Trustee Services (Pvt) Limited a trustee services provider for corporate debt securities and First Capital Equities (Pvt) Limited engaged in stock broking activities.
However, First Capital Treasuries accounts for 70% of the consolidated assets and 80% of the consolidated net trading income of First Capital for FY2017. The ratings take note of First Capital’s efforts to expand the business and financial performances of the other subsidiaries, which are engaged in corporate debt structuring, corporate finance, asset management, stock broking, extending margin trading facilities and trustee services; however their scale of operations continues to remain moderate. First Capital’s borrowings are largely short term in nature and are used for investment and lending to group entities. The rating factors the First Capital group’s established relationships with banks and financial institutions, providing access to funding. Further, ICRA Lanka expects timely funding support from First Capital Treasuries, considering the liquid nature of its assets.
First Capital, being a holding company derives its income from the dividends from the group entities and income from its investments, which includes interest income and profit from investments. For the FY2017 stand-alone income from investment activities improved (LKR 774 Mn total income in FY2017 vis-a-vis LKR 336 Mn in FY2016), while the share of profit from Subsidiaries increased steeply (LKR 194 Mn in FY2017 vis-à-vis 14 Mn in FY2016).