An A3 rating denotes capacity to honour timely payments, but the firm is vulnerable to future risks, explains Lanka Ratings in a statement Tuesday.
"The ratings reflect Senkadagala's commendable asset quality, above-average profitability, satisfactory liquidity and sturdy capitalisation," Lanka Ratings said, while assigning a stable outlook.
Set up in 1968, Senkadgala Finance's core business lies in leasing and offering higher purchase schemes to motor vehicles.
The firm operates out of nine branches, all linked via online realtime network, which facilitates centralised monitoring and control.
Despite its astute management, Senkadagala still lacks a formal system for strategic planning and budgetary control, warns Lanka Ratings.
"There is also room for a written underwriting policy which would ensure the preservation of Senkadagala's profitability and asset quality," says Lanka Ratings.
Senkadagala also leans heavily on bank borrowings and securitsation to raise long term funds.
As at end 2004, Senkadagala's borrowing stood at around two billion rupees and the firm plans to raise around Rs. 850 million in the coming months by securitising its leasing portfolio.
Though these loans offer better maturity structure, they are short-term. "They (Senkadagala) have to look at deposit mobilisation seriously," says Lanka Ratings analyst Nazleel Muzammil.
Senkadagala's Chief Executive Lakshman Balasuriya says the situation would be rectified once the firm steps up promoting its savings products.
Balasuriya says Senkadagala has finalised plans with licenseholders of Master Card and Cirrus network to mobilise low cost deposits.
"Nearly all leading commercial banks are running off these systems. We will issue an ATM (automatic teller machine) to savings accountholders, which can also be used as a debit card for any purchases," he said.
However, Balasuriya has no immediate plans to raise funds using its dual ratings.
"Nobody (banks) has ever turned us down for a facility. But the rates offered are still high, the same as what was offered us before we got a rating. The credit rating has not made much of a difference to us," he adds.
Lanka Ratings is fully owned subsidiary of Rating Agency Malaysia or RAM. The Malaysian unit is also an affiliate of Standard & Poor's, the world's largest rating agency.
Please click to download Lanka Rating Agency's analysis on Senkadagala Finance
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