JANASHAKTHI FINANCE PLC Financial Summary and Investment Analysis

Executive Overview

JANASHAKTHI FINANCE PLC, formerly Orient Finance PLC, is a Sri Lankan licensed non-bank financial institution offering fixed deposits, savings, leasing, gold loans, corporate finance and alternative finance solutions.

Periods reviewed: Q2 2024 through Q2 2026, together with the 12-month periods ended 2025-03-31 and 2026-03-31. All quarters below are expressed on a calendar-quarter basis, irrespective of the company's financial-year labels.

The dominant trend is rapid balance-sheet expansion accompanied by strong earnings growth. For the 12 months ended 2026-03-31, income rose 35.6%, net interest income 46.2%, profit before tax 62.1% and profit after tax 34.4% against the latest restated comparative. Loans expanded 47.9% and assets 40.7%. However, customer deposits grew only 14.4%, while interest-bearing borrowings rose 129.4%, materially increasing reliance on wholesale funding. Impairment charges also rose sharply.

Q2 2026 remained substantially stronger YoY, although profitability moderated sequentially from the unusually strong Q1 2026.

Financial Performance

Revenue and Profitability Trends

For a finance company, conventional gross profit/GP margin is not economically meaningful; net interest income and net operating income are more appropriate measures.

Rs million except percentages

The trajectory from Q2 2025 through Q1 2026 shows sustained expansion in income and operating earnings. Q2 2026 PAT increased 50.9% YoY to Rs90.4m, PBT increased 27.1% to Rs138.2m and net operating income increased 24.7% to Rs837.8m. Sequentially, however, PAT fell approximately 44.6%, PBT 21.0% and net operating income 5.1% from Q1 2026, indicating that the Q1 2026 profitability level should not yet be assumed to represent a stable quarterly run rate.

For the 12 months ended 2026-03-31, income reached Rs6,409.6m, net interest income Rs3,123.4m, net operating income Rs3,107.1m, PBT Rs563.7m and PAT Rs402.7m. PAT margin on total income was approximately 6.3%, broadly unchanged from the restated prior period despite much stronger absolute earnings, reflecting higher impairment, operating costs and taxation.

Balance Sheet Analysis

Rs billion

From 2025-03-31 to 2026-03-31, assets grew 40.7%, loans 47.9% and equity only 10.5%. Borrowings increased 129.4%, far faster than deposits at 14.4%. Consequently, deposits covered approximately 55.2% of loans at 2026-03-31 versus 71.4% one year earlier.

Total liabilities/equity reached approximately 8.55x, while borrowings plus overdrafts/equity were approximately 3.56x. These ratios are not directly comparable with industrial-company leverage because deposits form part of normal NBFI operations, but the funding-mix shift is important. A conventional current ratio is similarly not meaningful for this business model.

Cash Flow Analysis

For the 12 months ended 2026-03-31:

Negative operating cash flow was primarily caused by the Rs10.97bn increase in loans and receivables, rather than accounting losses. This expansion was financed through Rs16.95bn of new interest-bearing borrowings, partly offset by Rs9.46bn of repayments.

Conventional free cash flow is therefore of limited analytical value for JANASHAKTHI FINANCE PLC because lending itself is an operating activity. The more relevant issue is whether loan-book growth can continue without excessive funding cost, liquidity pressure or deterioration in credit quality.

Key Financial Ratios and Growth Indicators

Credit quality had improved markedly by 2025-03-31: gross NPL fell to 7.65% from 13.27%, net NPL to 3.24% from 8.29%, collection ratio improved to 63.7%, and Stage-3 impairment coverage reached 57.64%. Management attributed this to stronger underwriting, monitoring and recoveries and a greater emphasis on secured/asset-backed lending.

Capital nevertheless deserves monitoring. At 2025-03-31, Tier-1 capital adequacy was 12.09%, down from 15.22%, and total capital adequacy 14.19%, down from 15.63%, versus regulatory minima of 8.50% and 12.50%. Subsequent rapid asset growth increases the importance of maintaining adequate capital buffers.

Economic and Market Context

Management described easing interest rates and recovering credit demand as supportive to lending and profitability. The annual report also identified interest-rate movements as the company's most important market risk, given its combination of lending, deposit mobilisation and external funding.

The portfolio has increasingly favoured secured lending and asset-backed facilities, while gold loans remain an important business segment. Lower funding costs, continued credit demand and successful collections are therefore important earnings drivers, while renewed funding-cost pressure or weaker borrower quality would work in the opposite direction.

Future Potential and Outlook

Management has established several explicit medium-term objectives:

• Grow beyond Rs50bn of assets within five years, potentially through organic expansion, partnerships, product diversification or market consolidation. With assets already at Rs38.55bn by 2026-03-31, substantial progress had occurred rapidly.
• Raise ROE above 15% within two to three years and reduce the cost-to-income ratio below 50%.
• Maintain capital adequacy at or above approximately 14%.
• Broaden savings products to diversify funding and lower funding cost.
• Increase digitalisation and target younger customers.
• Develop financing around solar energy and electric vehicles.
• Expand customer propositions through initiatives such as Project Compass, alternative/Shariah-compliant finance, women-focused deposit products and the Continental Insurance leasing partnership.

Risks and Challenges

• Funding mismatch in growth rates: loan growth substantially exceeds deposit growth, increasingly requiring borrowings.
• Impairment normalisation: impairment charges increased from Rs90.7m to Rs293.6m in the 12 months ended 2026-03-31, a 223.5% increase.
• Capital consumption: rapid asset growth can compress regulatory capital ratios unless retained earnings or new capital keep pace.
• Restatement risk: the 2026-03-31 interim accounts restated prior-period comparatives after expenses relating to previous periods were identified. The latest restated figures are therefore more conservative than figures originally reported.
• Interest-rate/liquidity sensitivity: material because funding is sourced through both customer deposits and external borrowings.
• Quarterly earnings volatility: Q2 2026 remained strong YoY but was materially below Q1 2026 sequentially.
• Concentrated public float: limited free float can amplify market-price volatility and liquidity constraints.

Shareholder and Corporate Information

At 2026-03-31, Janashakthi Ltd directly held 44.12%, with substantial additional blocks recorded through banks in the name of Janashakthi Limited. Public holding was only 6.14%, comprising 12.95m shares and 1,111 public shareholders. The company remains on the CSE Second Board because of historical non-compliance with minimum public-holding requirements.

The reported share-price range for the period ended 2026-03-31 was Rs30.00–Rs42.80, with a closing price of Rs39.80, versus Rs19.20 a year earlier. The disclosed credit rating was corrected to BB+ with Positive Outlook by Lanka Rating Agency.

Investment Decision Indicators

Strengths

• Strong income, NII and absolute profit growth.
• Loan book expanding materially faster than the previous base.
• Significant historical improvement in gross and net NPL ratios.
• Improved collections and Stage-3 provisioning coverage.
• Management has explicit scale, ROE and efficiency targets.
• Product, digital and partnership expansion provides multiple growth avenues.

Weaknesses

• Equity growth is substantially slower than asset growth.
• Heavy acceleration in interest-bearing borrowings.
• Impairment charges are rising much faster than earnings.
• ROE remains below management's targeted >15% level.
• Prior-period financial figures required restatement.
• Very low public float.

Opportunities

• Economies of scale if the company crosses the Rs50bn asset threshold without proportional cost expansion.
• Better funding mix could materially improve spreads and ROE.
• Continued secured lending, gold finance, leasing and alternative-finance expansion.
• Digitalisation and new customer segments could improve distribution economics.

Threats

• Rapid credit expansion could eventually reverse recent asset-quality gains.
• Higher funding rates could compress net interest margins.
• Capital requirements may constrain growth or create future capital-raising needs.
• Economic deterioration could raise NPLs and impairment costs.

Overall Assessment

JANASHAKTHI FINANCE PLC has shifted into a high-growth phase, with earnings, lending and assets expanding strongly and historical credit quality improving. The central question is no longer whether the business can grow, but whether this growth can be funded and capitalised sustainably while preserving asset quality and improving ROE.

The most important indicators to monitor in subsequent quarters are NPL ratios, impairment-to-income, deposit versus loan growth, cost of funds, capital adequacy, cost-to-income ratio and ROE. Improvement across these measures alongside continued earnings growth would strengthen the financial profile; deterioration would indicate that balance-sheet expansion is beginning to carry a higher economic cost. No BUY, SELL or HOLD recommendation is made.