High Growth

Nov 05, 2007 (LBO) – Lanka Orix Leasing Company (LOLC) has grown 40.3 percent in the year to March 31 2007 compared to the rest of the industry which grew at 16 percent, Fitch Ratings said, confirming the firm's 'A(lka)' rating. However Fitch said bad loans were rising and asked the leasing firm to "aggressively monitor" asset quality in the context of weakening macro-economic conditions.

The outlook on the rating was 'stable'.

The firm had shown a compound annual growth rate of 24.8 percent from 2004. While industry loan growth fell, LOLC has shown 33.8 percent growth in the first quarter of this financial year.

"LOLC's rating reflects its relatively strong financial profile and its established customer franchise in the leasing industry," the rating agency said.

"Fitch also takes comfort in LOLC's association with Orix Corporation of Japan (ORIX), which has held 30 percent of LOLC's equity since its inception in 1980.

"Nevertheless, the relative lack of diversity in LOLC's funding avenues constrains the rating."

Fitch said LOLC high loan growth was because it had access to credit lines from multilateral donor agencies, which was an advantage over competitors who had to rely on local institutiona