SMB Leasing PLC benefited from a fresh capital infusion of over Rs. 2 billion recently following a Rights Issue. Incidentally, it was the second Rights Issue of SMB within the past 11 years, signaling a reinforcement of shareholder confidence.
Apart from returning to profitability in 2021, SMB has also succeeded in having its capital above the Central Bank requirement (including for licensed finance companies) of Rs. 2.5 billion, propelling itself within the top 10 in terms of stated capital and top 20 as per core capital respectively in the NBFI sector, industry analysts confirmed.
The company believes that with increased stated capital, in addition to providing leverage for a significantly higher return for shareholders and facilitating portfolio expansion plans, it would qualify to be on par with licensed finance companies in terms of core capital. The company is primarily engaged in providing finance leases, mortgage loans, personal loans and gold loans.
The Rights Issue proceeds will be utilized to expand the lease, loan, and pawning portfolios of the company. Since this can be done with the present organization structure with no additional overheads being incurred, the incremental yield from the portfolio expansion will directly have a positive impact on the net profit, which will increase shareholder return in 2021 and beyond.
In the 30 June 2021 quarter, SMB Leasing’s net interest income rose by 133% to Rs. 28 million, while operating income rose by 108% to Rs. 33.7 million. In the first half of the current financial year, after tax profit was Rs. 49 million, a complete turnaround from a loss of Rs. 9 million in the corresponding period of last year.
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