ECONOMYNEXT – Sri Lanka-based Hayleys Fentons Restricted has assigned a nationwide long-term ranking of A+(lka), by Fitch Scores, with a Steady Outlook.
“The ranking displays HFL’s main market share in home rooftop photo voltaic panel gross sales and set up, which drove money circulation within the monetary yr ending March 2025,” the rankings company mentioned.
Hayleys Fentons supplies companies in renewable vitality, constructing infrastructure programs, info and communication expertise, and tools buying and selling, however the sale and set up of rooftop photo voltaic panels, accounts for round 70 p.c of the corporate’s EBITDA.
The total assertion is reproduced beneath:
Fitch Assigns Sri Lanka’s Hayleys Fentons First Time ‘A+(lka)’ Nationwide Score
Fitch Scores – Colombo/Singapore: Fitch Scores has assigned Sri Lanka-based Hayleys Fentons Restricted (HFL) a Nationwide Lengthy-Time period Score of A+(lka). The Outlook is Steady.
The ranking displays HFL’s main market share in home rooftop photo voltaic panel gross sales and set up, which drove money circulation within the monetary yr ending March 2025 (FY25), alongside slowing progress amid regulatory dangers. Diversification into energy era over the following few years carries execution danger however may improve income visibility, topic to the weak credit score high quality of the only offtaker, Ceylon Electrical energy Board (CEB, A(lka)/Steady).
HFL’s A+(lka) ranking contains its standalone credit score profile of ‘a(lka)’ and a one-notch uplift for assist from its stronger father or mother, Hayleys PLC (AAA(lka)/Steady), reflecting average working incentives however low authorized and strategic incentives.
Key Score Drivers
Rooftop Photo voltaic Gross sales to Ease: Fitch expects HFL’s rooftop photo voltaic panel gross sales in Sri Lanka to say no modestly over the following few years. Nonetheless, we count on progress in HFL’s different companies, equivalent to companies and options for the development sector, to mitigate the impression on money circulation, supported by recovering consumption and development exercise. Total, we count on EBITDA from HFL’s present companies to stay regular in FY26-FY29, earlier than contemplating the contribution from deliberate energy era initiatives.
HFL is the market chief within the sale and set up of home rooftop photo voltaic panels, driving mixed income of about LKR19 billion in FY25. Residential, industrial and industrial installations added 129MW of era capability in FY25. Gross sales of rooftop photo voltaic panels rose quickly in FY23-FY24 amid acute energy disruptions following Sri Lanka’s financial disaster, and new engaging feed-in-tariffs (FITs) of round LKR37 a kilowatt hour in 2022. Nonetheless, FITs have since been lower to round LKR21 a unit, lengthening the payback interval and decreasing total shopper financial savings, because the nationwide grid grapples with rising renewable era.
Execution Dangers in Energy Era: HFL’s plans to assemble a 50MW wind energy plant and 37 ground-mounted solar energy crops with a mixed capability of 149MW, on an alternating present equal foundation (AC), are topic to execution danger. These initiatives are contingent on a large number of approvals from regulators, environmental our bodies and native governments, and topic to funding and land acquisition. Commissioning of photo voltaic crops and money circulation era ought to take an extra 90 days on common after energy buy agreements (PPAs) are signed with CEB, whereas the wind undertaking is more likely to be commissioned over 18 months.
HFL has signed a number of photo voltaic PPAs and expects the rest by end-November 2025, topic to the requisite approvals. Following a 30-day pause to handle area people issues, the wind plant – whose PPA was signed in Could 2025 – obtained governmental approval to recommence work in September 2025. Commissioning is probably going by September 2026, later than HFL’s earlier goal of April 2026. The wind and photo voltaic initiatives when commissioned will generate round two thirds of annual EBITDA by FY28, diversifying HFL’s money circulation and rising income visibility, however topic to CEB’s counterparty danger.
Leverage to Peak on Capex: We forecast EBITDA internet leverage to rise to a brief peak of 9.0x in FY27, from 1.0x in FY25, earlier than falling to about 3.0x by FYE28 as initiatives generate money circulation. Well timed undertaking execution is crucial for leverage to normalise inside ranking sensitivities. HFL plans to put money into vital capex in FY26 and FY27, primarily for energy initiatives, funded nearly solely by debt. It’s finalising lender agreements for the wind undertaking, earlier than issuing a development discover to CEB by February 2026 beneath the PPA. Native banks largely finance photo voltaic initiatives, with negotiations at numerous phases.
Curiosity Protection Moderating, however Wholesome: Fitch expects HFL’s EBITDA curiosity protection to say no to round 3.5x over the medium time period (FY25: 6.0x), assuming most energy initiatives are commissioned. Annual curiosity prices will rise, as curiosity funds are topic to grace intervals throughout undertaking development, and curiosity accrued throughout development is capitalised and added to excellent debt steadiness.
Dad or mum Assist: Fitch assesses ‘Medium’ operational incentives for Hayleys to assist HFL resulting from absolutely built-in branding and administration between the 2 entities. Authorized incentives are ‘Low’, reflecting the waning father or mother ensures on HFL’s financial institution debt amid the subsidiary’s bettering credit score profile. Nonetheless, vital father or mother ensures on financial institution debt have been forthcoming to HFL when required. Strategic incentives for Hayleys to assist are additionally ‘Low’ given the father or mother’s extremely diversified operations.
Peer Evaluation
JAT Holdings PLC (AA(lka)/Steady) is rated two notches above HFL. JAT is the chief within the area of interest wooden coating-market, and is the only native distributor of The Sherwin-Williams Firm (Issuer Default Score: BBB+/Steady). JAT has smaller EBITDA scale than HFL, however an extended document of regular demand and about 25% of income is from abroad. Nonetheless, demand for HFL’s rooftop photo voltaic panels surged in 2022-2023 amid extreme energy shortages throughout Sri Lanka’s financial disaster, however situations have since improved materially. Accordingly, HFL’s ranking displays dangers from a slowdown in photo voltaic panel gross sales and execution dangers in its energy era initiatives.
Renewable energy producer WindForce PLC (A+(lka)/Steady) is rated on the similar degree as HFL. WindForce is extra established and presently the most important rated renewable participant, with capability of 163MW throughout wind, photo voltaic and hydropower. HFL can be absolutely uncovered to CEB as its sole offtaker, however WindForce advantages from some diversification, with about 20% of EBIT generated in Uganda. WindForce’s leverage is low, whereas HFL’s leverage is more likely to peak because it executes its deliberate energy era investments. HFL’s standalone Nationwide Lengthy-Time period Score of ‘a(lka)’ is decrease than that of WindForce, however HFL’s ranking advantages from linkages with its stronger father or mother, Hayleys.
Resus Power PLC (A-(lka)/Steady), a renewable energy producer, is rated two notches beneath HFL. Resus has about 24MW of hydro and photo voltaic capability, with its ranking reflecting its smaller scale and tight liquidity. It’s uncovered to CEB’s credit score danger as the only offtaker of its energy era. Liquidity is tight at Resus, with money more likely to be inadequate for short-term maturities, though mitigated by entry to home banks. We count on HFL’s energy era capability to achieve related ranges to that of Resus over the following six months, with additional progress topic to execution dangers.
Key Assumptions
Fitch’s Key Assumptions Throughout the Score Case for the Issuer:
– Income from non-generation segments to extend by round 2% yearly in FY26-FY27, with progress in companies and options for the development sector to offset a modest slowdown in rooftop photo voltaic gross sales;
– Energy era income to contribute 3% and 22% of income in FY27-FY28, topic to execution danger;
– EBITDA margin to common round 14% in FY26-FY27;
– Annual dividend payout of round 60% of internet revenue over FY26-FY29.
RATING SENSITIVITIES
Components that Might, Individually or Collectively, Result in Unfavourable Score Motion/Downgrade:
– EBITDA internet leverage rising above 4.0x on a sustained foundation;
– EBITDA curiosity protection falling beneath 1.5x on a sustained foundation;
– Weaker incentives for assist from father or mother Hayleys.
Components that Might, Individually or Collectively, Result in Optimistic Score Motion/Improve:
– Diminished execution dangers and elevated scale within the electrical energy era enterprise, with commissioned capability of greater than 90MW;
– Stronger incentives for assist from father or mother Hayleys.
Liquidity and Debt Construction
The vast majority of HFL’s excellent debt at FYE25 was brief time period, funding working capital. Debt maturing over the following 12 months was LKR7 billion, in opposition to internet working capital belongings of round LKR8 billion, whereas available money was round LKR4 billion. HFL additionally had entry to unused and uncommitted credit score strains, in extra of its short-term debt obligations, from a number of home banks. We consider home banks will refinance HFL’s short-term services given its regular working capital cycle of round 105 days previously two years, and powerful relationships as a part of the Hayleys group.
Issuer Profile
HFL supplies a variety of diversified companies in renewable vitality, constructing infrastructure programs, info and communication expertise, and tools buying and selling. Nonetheless, the sale and set up of rooftop photo voltaic panels, primarily beneath the renewable vitality phase, has traditionally accounted for round 70% of the corporate’s EBITDA.
Date of Related Committee
11 September 2025
