A Record-breaking Performance From LOLC  
Posted 1,June

By Chaveendra Dunuwille

In Local News

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LOLC Group achieves first-ever historic profitability in Sri Lanka’s corporate sector, recording a  stunning Rs. 57 billion in Profit Before Tax (PBT) and Rs. 53 billion in Profit After Tax (PAT)  for the financial year ending 31st March 2021. Result on divestment of Group investments  amounted to Rs. 44 billion, as against Rs. 6 billion in FY20. LOLC is now considered one of the  largest Micro and Small & Medium Enterprises (MSME) platforms in the world.  

This ground-breaking performance by the Group resulted in a Rs. 28 billion being recorded as  Profits Attributed to the Equity Holders of the Parent company. The Group results denoted an  impressive Earnings Per Share of Rs. 59.01 from Rs. 22.93 the previous year. The total  comprehensive income was Rs. 81 billion out of which Rs. 37 billion is attributed to the Equity  Holders of the Parent company. Furthermore, the total attributable comprehensive income per  share was Rs. 77.84. The resultant net assets value per share as at the year-end was Rs. 286.23  compared to Rs. 194.72 reported last year, demonstrating the exceptional value creation by the  Group during the concluded financial year.  

All diverse businesses of the LOLC group recorded an upward trend in profitability in 2020/21,  despite the adverse effects of COVID-19 being felt by Sri Lanka’s economy through 2020. LOLC Group’s financial services achieved Rs. 17.3 billion as bottom line, despite allowing for a  strong level of risk mitigating provisions amounting to Rs. 30 billion for bad and doubtful debts  on a very conservative basis against Rs. 17 billion last year.  

LOLC’s finance companies in Sri Lanka experienced a strong level of deposit inflows despite  all-time low interest rates. The flagship finance company, LOLC Finance PLC (LOFC), with a  total assets base of Rs. 170 billion, recorded PAT of Rs. 4.4 billion. Commercial Leasing &  Finance PLC (CLC) with a total assets base of Rs. 77 billion also recorded strong performance,  posting a PAT of Rs. 2.2 billion in 2020/21. Meanwhile, with a total assets base of Rs. 19 billion,  LOLC Development Finance (LODF) PLC recorded a PAT of Rs. 155 million.  

Seylan Bank succeeded in delivering a steady PAT of Rs. 3 billion for FY2020. Deposits  increased by 9.9% and advances increased by 4%, whereas the CASA ratio stood at 33%.  

A 70% stake in PRASAC – a Cambodian microfinance organization in which LOLC invested  back in 2007 – was recently acquired by the Republic of Korea’s largest commercial bank,  Kookmin Bank, for $ 603 million – thereby contributing to overall Group profitability and  strengthening its balance sheet with a put option to divest the remaining stake in December  2021.  

LOLC’s overseas financial services entities made strong contributions to the profitability of the  Group in 2020/21, with LOLC Cambodia leading the way with a $ 45 million in PAT with a total  assets base exceeding $ 1 billion. In Cambodia, LOLC continues to hold a 97% stake in LOLC  Cambodia – the fourth-largest microfinance company in terms of market position, and the second 

most profitable microfinance institution in Cambodia after PRASAC. LOLC Myanmar has seen  exceptional performance in FY2020/21 by posting a profit of $ 3 million as PAT and envisages  strong growth prospects amidst the atmosphere of a large unbanked population. LOLC has made  investments in many other countries with its latest addition in the African Region in 2019. The  global expansion strategy for the financial services sector remains a key focus, with plans being  made for expanding into more markets in both Africa and Asia.  

LOLC’s two insurance companies – LOLC General Insurance Ltd. and LOLC Life Assurance  Ltd. – demonstrated strong resilience against the unprecedented impacts of the pandemic and  other socio-economic adversities. LOLC Life Assurance registered a GWP (Gross Written  Premium) of Rs 3.2 billion – the first life company in the industry to achieve this milestone in  under 10 years – and posted a growth of 21% in GWP, backed by a robust growth of 59% in first  year premiums – the highest new business growth in the insurance industry. LOLC General  Insurance achieved Rs. 6 billion in GWP in 2020 – a feat achieved in under 10 years, a first for  Sri Lanka. LOLC Securities (LOSEC) Ltd., a leading stockbroker with strong retail and local and  foreign institutional client base, expanded its market share from 7% to 9.5% in FY 2020/21. The  company is ranked second among peers in terms of total market turnover during the year under  review. Improved brokerage earnings, ongoing expense management policies, and positive stock  market sentiment helped the company to record impressive performance.  

Brown & Company PLC, with a history of 146 years, together with its investments arm Browns  Investments PLC (BI), under which LOLC’s non-financial services businesses are structured,  recorded resilient performance during the year under review. Despite the challenges encountered  in the macroeconomic environment and in the intensity of the competitive landscape, Browns’  trading business recorded one of its highest revenues with an increase of 45%, with a gross profit  increase of 47% for the FY 2020/21, while posting a PAT of Rs. 1.8 billion. Browns and BI have  energised many vital sectors of the Sri Lankan economy, including trading and manufacturing,  precision engineering, mechanisation of agriculture, automotive, power storage, renewable  energy, leisure and hospitality, plantations, construction, marine, and veterinary  pharmaceuticals.  

Browns Investments entered into a landmark agreement to partner with China Harbour  Engineering Company Limited (CHEC) to commence the Colombo International Finance Centre  (CIFC) mixed development project, which has strategic development project status in the  Colombo Port City (CPC). This project comprises of a land area under development of 6.8  hectares, with an investment value totalling $ 1 billion. The total investment in phase one  amounts to $ 450 million, with a buildable land area spanning 3.06 hectares, which is leased  from CHEC Port City Colombo Ltd. to the new SPV that will be jointly managed by Browns and  CHEC. This will be a significant undertaking involving the construction of two residential  apartment towers, one serviced apartment tower, one office tower and a retail podium on the  ground floor. 

The LOLC Group is also exploring technology and innovation aligned to the President Gotabaya  Rajapaksa’s vision, and to infuse local value addition. LOLC Advanced Technologies has built  capacity to convert graphite to graphene and in partnership with SLINTEC, in which it has  invested, is also conducting value additions such as fortifying rice with nutraceuticals and  researching organic fertilisers to cater to the current demand. LOLC’s thirst for new knowledge  and scientific innovation remains insatiable. More importantly, the Group provides opportunities  for local scientists to work on exciting projects and encourages a spirit of discovery and  innovation not abundantly available in Sri Lanka.