The Investor Sentiment - Equity and investments forum for Sri Lankans
The Investor Sentiment - Equity and investments forum for Sri Lankans
Would you like to react to this message? Create an account in a few clicks or log in to continue.
Please send an email to contact.lankaninvestor@gmail.com if you face any technical difficulties when posting
Search
Display results as :
Advanced Search
Latest topics
Coronavirus UpdatesFri Jan 22, 2021 4:22 pmThe Invisible
ACL CablesWed Dec 30, 2020 7:22 pmsubash
Merry Christmas to AllTue Dec 29, 2020 4:53 pmchutiputha
Trading Journal Sat Dec 12, 2020 11:33 pmxmart
HVA FoodsFri Dec 04, 2020 10:25 amThe Invisible
Tokyo CementMon Nov 23, 2020 9:42 amRajapaksap
Insider Dealings Fri Nov 20, 2020 2:30 ampjrngroup
UML United MotorsTue Nov 10, 2020 8:50 amThe Invisible
ExpolankaMon Nov 09, 2020 8:46 pmsmallville
Plantation Sector UpdatesSat Nov 07, 2020 8:15 amRajapaksap
HAYC - HaycarbFri Nov 06, 2020 12:11 pmsubash
LWL.N0000 (Lanka Walltiles PLC)Fri Oct 16, 2020 12:50 amsubash
CSE Daylight Robbery !Mon Sep 21, 2020 9:54 pmYin-Yang
Disclaimer


Information posted in this forum are entirely of the respective members' personal views. The views posted on this open online forum of contributors do not constitute a recommendation buy or sell. The site nor the connected parties will be responsible for the posts posted on the forum and will take best possible action to remove any unlawful or inappropriate posts.
All rights to articles of value authored by members posted on the forum belong to the respective authors. Re-using without the consent of the authors is prohibited. Due credit with links to original source should be given when quoting content from the forum.
This is an educational portal and not one that gives recommendations. Please obtain investment advises from a Registered Investment Advisor through a stock broker

Go down
avatar
Future123
Active Member
Active Member
Posts : 1435
Join date : 2014-04-09

Interest rate pressure on Sri Lankan corporates – Fitch  Empty Interest rate pressure on Sri Lankan corporates – Fitch

on Sun Jun 25, 2017 1:34 pm
http://www.sundaytimes.lk/170625/business-times/interest-rate-pressure-on-sri-lankan-corporates-fitch-246170.html

Interest rate pressure on Sri Lankan corporates – Fitch
View(s): 43

Rising domestic interest rates are expected to hurt Sri Lankan corporates over the next 12 months, according to Fitch Ratings.

Corporates’ borrowing costs have increased more than 200 bp in the 12 months to March 2017 as the Central Bank has increased policy rates by 125 bp and the statutory reserve ratio by 150 bp in an attempt to reign in aggressive credit growth, Fitch said in a media release on Tuesday.

Fitch said it doesn’t expect the pressure on interest rates to ease in the near term owing to rising inflationary pressures and weak external finances.

Annual inflation as measured by the Colombo consumer price index rose to 8.4 per cent in April 2017 from 4.3 per cent a year ago.

Corporates with high short-term working capital requirements such as retail and manufacturing companies are hurt the most by the recent rate increases.

“In Fitch’s view, the two large consumer-durable retailers, Singer Sri Lanka and Abans are the most affected of the entities we rate as most of their borrowings consist of short-term working capital financing and will have to be rolled over at higher rates. Furthermore, both companies realise 30 -40 per cent of their sales through hire-purchase schemes which can meaningfully weaken with rising interest rates and slow EBITDA growth. Fitch believes Singer has more headroom in its current rating to withstand these challenges compared with Abans,” the agency said.

Kotagala Plantations PLC may also face further liquidity pressure on account of higher interest payments. Fitch believes Hemas Holdings and Sunshine Holdings to be the least affected due to their low refinancing requirements during the next 12 months, the release said.

“We have assumed that 100 per cent of corporates’ short-term debt and 40 per cent of long-term debt will be re-priced at higher rates immediately. Most of the long-term debt stems from banks and around half of such debt are at a variable interest rate. As of end-March 2017, almost 50 per cent of the outstanding borrowings of Fitch-rated corporates consisted of short-term borrowings primarily funding working capital, exposing the companies to modest interest-rate risk at the point of refinancing. Only 12 per cent of the outstanding borrowings of Fitch-rated corporates consisted of debenture financing, which is predominantly on fixed rates,” Fitch said.
Back to top
Permissions in this forum:
You cannot reply to topics in this forum