# ALLIANCE FINANCE COMPANY PLC Financial Summary

Canonical URL: https://pal.lk/updates/alli-financial-summary
Symbol: ALLI.N0000
Company: ALLIANCE FINANCE COMPANY PLC
Sector: Financial Services
Published: 2026-08-15T21:16:46Z
Last updated: 2026-08-15T21:16:45Z

# Alliance Finance Company PLC Financial Summary and Investment Analysis

## Executive Overview

Alliance Finance Company PLC is a licensed Sri Lankan finance company providing leasing, vehicle and other loans, gold loans, microfinance, deposits, savings and related financial services. The Group includes Alfinco Insurance Brokers (Pvt) Ltd.

**Periods covered:** Q3 2023 to Q2 2026, audited year ended 2026-03-31, and subsequent disclosures through 2026-08-14.

The audited year ended 2026-03-31 was the strongest in the Company's history: Group gross income reached **LKR 18.42 Bn**, net interest income **LKR 9.06 Bn**, and profit after tax **LKR 2.28 Bn**. Group assets expanded **18%** to **LKR 97.09 Bn** and equity increased **19%** to **LKR 11.58 Bn**.

However, Q2 2026 showed earnings moderation. Gross income remained strong at **LKR 4.68 Bn**, but Group PAT declined **8% YoY** and **48% QoQ** to **LKR 398.44 Mn**. Credit quality remains an important watchpoint, although NPL ratios improved materially from their Q4 2025 peak.

The 2026-03-31 audited financial statements received a **true and fair view** audit opinion.

## Financial Performance

### Revenue and Profitability Trends

For a finance company, **gross income and net interest income are more meaningful than conventional revenue/gross profit**.

| Period  | Gross Income LKR Bn | Net Interest Income LKR Bn | Group PAT LKR Mn | PAT/Gross Income |
| ------- | ------------------: | -------------------------: | ---------------: | ---------------: |
| Q3 2023 |                3.44 |                       1.35 |           162.41 |             4.7% |
| Q4 2023 |                3.59 |                       1.65 |           307.14 |             8.6% |
| Q1 2024 |                3.82 |                       1.88 |           455.81 |            11.9% |
| Q2 2024 |                3.70 |                       1.85 |           264.75 |             7.2% |
| Q3 2024 |                3.89 |                       2.02 |           348.00 |             8.9% |
| Q4 2024 |                4.07 |                       2.10 |           451.57 |            11.1% |
| Q1 2025 |                4.18 |                       2.19 |           752.50 |            18.0% |
| Q2 2025 |                4.43 |                       2.40 |           434.23 |             9.8% |
| Q3 2025 |                4.65 |                       2.34 |           523.11 |            11.3% |
| Q4 2025 |                4.68 |                       2.32 |           468.06 |            10.0% |
| Q1 2026 |                4.67 |                       2.25 |           769.25 |            16.5% |
| Q2 2026 |                4.68 |                       2.27 |           398.44 |             8.5% |

The long-term direction is clearly upward: Q2 2026 gross income was approximately **36% above Q3 2023**. From reported 2024 to 2026 year-end figures, approximate two-year CAGRs were **14.4% for gross income** and **50.3% for Group PAT**.

In Q2 2026, gross income rose **6% YoY**, while the latest comparative presentation showed net interest income broadly flat. Fee income and other operating income weakened and operating expenses rose, reducing Group PBT to **LKR 668.21 Mn**, down **12% YoY**. PAT fell to **LKR 398.44 Mn**.

## Balance Sheet Analysis

| Group Metric       |   2025-03-31 |   2026-03-31 |   2026-06-30 |
| ------------------ | -----------: | -----------: | -----------: |
| Total assets       | LKR 82.09 Bn | LKR 97.09 Bn | LKR 97.48 Bn |
| Loans and advances |     38.34 Bn |     54.40 Bn |     55.93 Bn |
| Lease receivables  |     24.17 Bn |     23.10 Bn |     22.78 Bn |
| Deposits           |     36.52 Bn |     37.77 Bn |     36.89 Bn |
| Due to banks       |     30.40 Bn |     40.31 Bn |     40.71 Bn |
| Total equity       |      9.72 Bn |     11.58 Bn |     11.99 Bn |

Asset growth was driven primarily by loans, which increased **42%** during the year ended 2026-03-31, while lease receivables contracted about **4%**. Bank funding increased approximately **33%**, considerably faster than deposits at **3%**, increasing reliance on wholesale/bank funding.

At 2026-06-30, **debt/equity was 7.17x**, versus 7.74x one year earlier. Conventional current ratios are not meaningful for this financial institution; liquidity indicators are more relevant.

## Cash Flow Analysis

For the audited year ended 2026-03-31, Group operating cash flow was **negative LKR 14.95 Bn**, reflecting aggressive expansion of the lending portfolio. Investing cash flow was **positive LKR 3.68 Bn** and financing cash flow **positive LKR 14.36 Bn**, demonstrating that portfolio growth required substantial external funding.

In Q2 2026, operating cash flow reversed to **positive LKR 3.50 Bn**, while investing cash flow was **negative LKR 1.92 Bn** and financing cash flow **negative LKR 1.60 Bn**.

Conventional free cash flow is less informative for a finance company because lending itself drives operating cash movements.

## Key Financial Ratios and Growth Indicators

| Metric                      |                       Latest |
| --------------------------- | ---------------------------: |
| Tier 1 capital adequacy     |  **12.09%** vs 8.50% minimum |
| Total capital adequacy      | **16.44%** vs 12.50% minimum |
| Liquid asset ratio          |                   **18.41%** |
| Gross NPL ratio             |                    **5.66%** |
| Net NPL ratio               |                    **2.89%** |
| Debt/equity                 |                    **7.17x** |
| Interest cover              |                    **1.41x** |
| 2026-03-31 ROE after tax    |                   **20.06%** |
| 2026-03-31 ROA after tax    |                    **2.29%** |
| 2026-03-31 efficiency ratio |                   **52.18%** |
| 2026-03-31 EPS              |                **LKR 60.49** |
| 2026-03-31 NAV/share        |               **LKR 325.69** |
| 2026-03-31 P/E              |                    **5.21x** |

Asset quality deteriorated during 2025, with gross/net NPL ratios reaching **8.28%/5.47% in Q4 2025**, before improving to **5.66%/2.89% by Q2 2026**. Management also notes that new CBSL classification rules distort year-on-year comparison: the 2026-03-31 gross NPL ratio of 5.86% would have been approximately **3.17% under the previous methodology**.

## Economic and Market Context

Management describes 2025 as an early-recovery year for Sri Lanka, with approximately **5% GDP growth**, easing inflation and stronger credit demand. NBFI-sector assets reportedly expanded approximately **40%**, while sector Stage 3 loans improved from **8.6% to 6.1%**.

System liquidity remained generally supportive, although continued rapid credit expansion could tighten funding conditions. Vehicle imports create both lending opportunities and risks through falling second-hand vehicle collateral values.

## Future Potential and Outlook

Management intends to use the next **12-18 months for consolidation**, strengthening technology, governance, people and processes, while targeting a more conservative **15%-16% annual growth rate**.

Targets by the year ending **2028-03-31** include:

* Sustainable mobility financing of **LKR 32.8 Bn**, including **LKR 5.2 Bn** of electric-mobility financing.
* Gold-backed financing of **LKR 33.9 Bn**, including **LKR 32.7 Bn** of gold loans.
* Deposits and savings mobilisation of **LKR 57.2 Bn**.
* MSME lending of **LKR 13.8 Bn**, including **LKR 1 Bn** for women-led MSMEs.
* Climate-finance portfolio of **LKR 4.16 Bn**.

The Finacle core banking rollout, Microsoft Dynamics ERP, central data warehouse and digital infrastructure investments are intended to improve scalability, controls and analytics.

The **LKR 2.0 Bn Social Bond** was fully deployed by Q2 2026: LKR 1.5 Bn toward MSME/rural entrepreneurship and LKR 500 Mn toward women-focused microfinance. Of the **LKR 1.0 Bn Green Bond**, LKR 526.62 Mn had been deployed into rooftop solar and LKR 20 Mn into solar suppliers.

## Risks and Challenges

* **Credit quality:** NPL levels remain above early-2025 levels despite recent improvement.
* **Funding structure:** rapid asset expansion has relied heavily on bank and institutional borrowing.
* **Interest-cover pressure:** declined to **1.41x** from 1.58x.
* **Collateral risk:** imported vehicles may continue depressing second-hand vehicle values.
* **Climate risk:** adverse weather has affected SME and grassroots borrower repayment capacity.
* **Execution risk:** rapid growth and the core-banking migration temporarily affected recovery operations.
* **Tax exposure:** a **LKR 892.64 Mn** surcharge-tax assessment relating to 2020/21 is being challenged. For 2018/19, an administrative review determined **LKR 159 Mn tax plus LKR 31 Mn penalty**, for which management states adequate provision has been made.
* **Leverage:** debt/equity remains high at 7.17x, although capital ratios remain above regulatory minima.

## Shareholder and Corporate Information

At 2026-06-30, **33,696,000 shares** were outstanding. R.K.E.P. de Silva held **36.87%**, Motor Service Station (Pvt) Ltd **13.79%**, D.M.E.P. Perera **7.67%**, with the five largest holders collectively owning approximately **66.76%**.

Public holding was **35.39%**, represented by 2,374 shareholders.

The 2026-03-31 dividend was **LKR 10.00/share**, compared with LKR 17.20 previously; dividend payout fell to **16.53%**, while dividend cover improved to **6.05x**.

The share closed at **LKR 305.50 on 2026-08-14**, versus LKR 315.00 at the beginning of the latest 90-session period, a **-3.02%** return. The period range was **LKR 302.50-LKR 370.00**. Foreign ownership declined from **0.56% to 0.50%**.

## Investment Decision Indicators

**Strengths**

* Strong multi-year earnings and balance-sheet expansion.
* Record audited profitability and approximately 20% ROE.
* Capital and liquidity comfortably above regulatory minima.
* Strong growth in loans and gold-backed financing.
* NPL ratios recovering sharply from Q4 2025 peaks.
* Established sustainable-finance funding channels and fully deployed Social Bond.
* Management deliberately shifting from rapid expansion toward consolidation.

**Weaknesses**

* Q2 2026 earnings weakened despite stable gross income.
* Funding growth has depended disproportionately on bank borrowings.
* NPLs remain material and net NPL remains above the prior year.
* Interest cover is declining.
* High leverage and significant tax disputes require monitoring.

**Overall assessment:** Alliance Finance Company PLC has moved from recovery into a substantially larger and more profitable operating scale, with strong capitalisation and clear strategic growth avenues. The main investment question is whether the Company can preserve asset quality and margins while funding its enlarged loan book without excessive leverage. Q2 2026 suggests revenue momentum remains intact, but earnings quality, operating-cost discipline, NPL trends and funding costs should now receive greater weight than headline asset growth alone.