Hayleys Rs7bn debt issue has been assigned a ‘AAA(lka)’ National Long-Term Rating by Fitch Ratings, reinforcing investor confidence in the Sri Lankan conglomerate’s credit profile. The rating aligns with Hayleys PLC’s existing unsecured instruments and reflects expectations of moderating leverage over the medium term.
Fitch assigns AAA rating to Hayleys Rs7bn debt issue in Sri Lanka
Sri Lanka-listed conglomerate Hayleys PLC plans to raise up to LKR 7 billion through unsecured senior redeemable debentures. Fitch’s top-tier national rating signals very low default risk relative to other domestic issuers and positions the offering among the strongest corporate debt instruments in the local capital market.
The debentures are rated in line with Hayleys’ National Long-Term Rating of ‘AAA(lka)’ and its outstanding unsecured notes. Fitch noted that subordination risk from subsidiary-level debt remains limited, provided that the ratio of subsidiary debt to consolidated EBITDA does not exceed 2.5 times. That ratio increased to 2.9x in the third quarter of FY26, primarily due to seasonal working capital requirements in the consumer and retail segment and expanded production capacity in the purification business.
However, the agency expects the ratio to gradually moderate toward 2.5x by FY27, supported by EBITDA growth as domestic demand recovers and new capacity additions begin contributing meaningfully to earnings. Failure to achieve this deleveraging trajectory could result in the unsecured debentures being rated one notch below the company’s national rating.
Fitch forecasts revenue growth of 19 percent in FY26, driven by strong momentum across consumer and retail, hand protection, purification, and transportation and logistics segments. Consumer demand in Sri Lanka has improved amid macroeconomic stabilisation, while the hand protection and purification businesses are benefiting from capacity expansions and product diversification. The transportation and logistics arm is also positioned to gain from rising transshipment volumes across Asia.
Margin performance, however, remains mixed. Fitch expects EBITDA margins to moderate to around 10 percent in FY26, compared with 11 percent in FY25. The decline is attributed mainly to the textiles segment, which is facing pricing pressure from weaker demand in key export markets following increased US tariffs, and to high operating leverage in the construction segment due to underutilised capacity. A recovery to around 11 percent is anticipated in FY27 as price adjustments take effect and capacity utilisation improves.
Capital expenditure will remain elevated. Fitch projects average annual capex of approximately LKR 20 billion between FY26 and FY29, broadly in line with recent years. While this supports long-term revenue expansion, it is expected to keep free cash flow negative over the forecast period. A planned rights issue of LKR 9 billion in FY26 is intended to partially finance new investments and reduce debt.
From a diversification standpoint, Hayleys benefits from a broad business portfolio. Eight business segments generate over 80 percent of group EBIT, and exports—direct and indirect—accounted for 53 percent of revenue in FY25. Around 15 percent of revenue originates from Europe and the United States, limiting exposure to slower-growth developed markets. Manufacturing operations in purification and hand protection are geographically diversified, with significant capacity in Thailand and Indonesia.
In peer comparison, Fitch rates Hayleys at the same level as Lion Brewery (Ceylon) PLC, Melstacorp PLC, and Hemas Holdings PLC, each carrying a ‘AAA(lka)’ rating with a stable outlook. While some of these peers benefit from more defensive cash flows or stronger free cash flow generation, Hayleys’ diversified geographic footprint and end-market exposure mitigate cyclical risks in segments such as textiles and construction.
Sunshine Holdings PLC is rated one notch lower at ‘AA+(lka)’, reflecting smaller scale and regulatory risks in certain business lines despite relatively lower leverage.
Liquidity remains a key consideration. As of end-December 2025, Hayleys held LKR 55 billion in unrestricted cash against LKR 160 billion in debt maturing within 12 months. Although this includes short-term borrowings, Fitch expects continued rollover support from domestic banks, underpinned by LKR 135 billion in net working capital and a healthy working capital cycle. The conglomerate’s established banking relationships and scale within Sri Lanka’s corporate sector further support liquidity resilience.
Fitch’s rating sensitivities indicate potential downward pressure if group EBITDAR net leverage, excluding its step-down subsidiary Singer Finance (Lanka) PLC, rises above 4.0x for a sustained period or if fixed-charge coverage falls below 2.0x. Conversely, there is no scope for an upgrade, as the company already sits at the highest level on the Sri Lankan national rating scale.
Overall, the AAA assessment of the Hayleys Rs7bn debt issue underscores confidence in the group’s diversified earnings base, disciplined capital structure management, and ability to navigate cyclical headwinds while sustaining growth investments.