But total new registrations are up 9.7 percent to 105,371 units from Jan-June, according to Central Bank's data.
"There has been no slowdown, just a blip here and there. We are seeing a growth in people taking out leases for new or second hand vehicles," Lakshman Balasuriya, Director Senkadagala Finance Company Ltd., told LBO.
Though a relatively small firm carrying a tiny Rs. 2 billion portfolio, Senkadagala is virtually doubling up operations and hunting for spare cash, as consumer demand fails to wane off.
For instance, in July 2005, Senkadagala issued 468 contracts valued at Rs. 211 million. During the same period 2004, the firm issued 131 contracts worth Rs. 72 million.
"Quite to the contrary, the leasing business is doing well despite uncertainties on taxes. People can’t buy outright any longer so they lease vehicles out," says Nilushka Wijayadasa, Head of Corporate Finance at Capital Alliance Holdings – a boutique debt market player.
Balasuriya says the higher taxes have also raised asset values on leases. "Since the security value is high, we are now able to be a bit selective on our transactions, sometimes asking customers to pay a bigger down payment."
Senkadagala is testing public appetite by issuing its maiden Rs. 250 million debenture later this month.
The four-year issue will be rated by Fitch Ratings Lanka and will be the first new instrument to be listed on the Colombo Stock Exchange's debt exchange.
Investors have a choice of going for a fixed rate or floating rate (2.75 percent above the three month treasury bill). The floating rate note comes with a cap of 10 percent and a floor of 15 percent. Three month treasuries now trade at 9.17 percent.
Capital Alliance Holdings, which structured the deal, has deliberately priced the fixed rate at 14 percent.
"It's a market penetration price. But the pricing is a bargain and very attractive when compared to their credit rating," explains Ajith Fernando, Chief Executive Capital Alliance Holdings.
With a BBB+ rating under its belt, tech savvy Senkadagala is also looking at public offering in the medium term.
Balasuriya says a quotation by an introduction will precede an eventual public offering.
Set up in 1968, Senkadgala Finance Company's core business lies in leasing and offering higher purchase schemes to motor vehicles. The firm operates out of eight branches, all linked via online realtime network, which facilitates centralized monitoring and control.
-Mel Gunasekera: mel@vanguardlk.com