ICRA Lanka Limited, a subsidiary of ICRA Limited, a group company of Moody’s Investors Service, has reaffirmed the issuer rating of [SL]BBB+ with stable outlook for Dunamis Capital PLC (DCP).
ICRA Lanka has also reaffirmed the issue ratings of [SL]BBB+ with stable outlook for the two Rs.1 billion senior unsecured debenture programmes of the company. 

ICRA Lanka has taken a consolidated view of DCP and its subsidiaries, with DCP being the holding company, for arriving at the ratings. The ratings factor in DCP’s status as the parent company of First Capital Holdings PLC (FCH; issuer rating of [SL]A- with stable outlook). The rating takes note of the improvement in the business and financial performance of the real estate development subsidiary, Kelsey Developments PLC (Kelsey), which is likely to support the overall performance of the DCP group (DCP and its subsidiaries consolidated) to some extent.

Kelsey reported a net profit of Rs.54 million during FY2016 (Rs.32 million loss in FY2015), while the manufacturing subsidiary, Premier Synthetic Leather Manufacturers (Private) Limited (PRIMO) continued to report losses (Rs.132 million in FY 2016 as compared to Rs.110 million in FY2015). DCP’s consolidated performance was impacted by FCH, which accounted for close to 53 percent of the total DCP consolidated income during FY2016 vis-à-vis 91 percent during FY2015. 
FCH’s performance in turn is largely dependent on the performance of First Capital Treasuries PLC (FCT; issuer rating of [SL]A- with stable outlook), as the contribution from the other FCH subsidiaries presently is quite modest. FCT accounted for about 74 percent of the total consolidated asset base of FCH as on March 31, 2016. Thus, DCP’s overall performance is expected to remain susceptible to the risks inherent in FCT till the other subsidiaries (including subsidiaries of FCH) scale up and improve their contribution to the group. 

Further, ICRA Lanka takes note of the recent high gearing level of FCT and the impact it has on the consolidated gearing profile of DCP. The consolidated gearing of DCP increased to 28.9 times as on June 30, 2016 as compared to 18.3 times as on March 31, 2016. The same will be closely monitored by ICRA Lanka and would be a key rating sensitivity for DCP. 

ICRA Lanka takes cognisance of the currently comfortable funding and liquidity position of the DCP group, given the limited dependence on group for funding its investment plans, especially in Kelsey. However, ICRA Lanka would closely monitor the extent of the proposed investments, and the impact on the overall liquidity and gearing profile of DCP.