Softlogic Finance proposes capital reduction to clear Rs.7.6bn in accumulated losses

Softlogic Finance PLC has announced a proposal to reduce its stated capital by approximately Rs.7.6 billion to set off the carried-forward retained losses, a strategic move aimed at restructuring its balance sheet to reflect a more accurate financial position.

​The company will seek the shareholder approval for the measure at an Extraordinary General Meeting scheduled for February 25, 2026, at the Central Hospital Limited auditorium in Colombo.

​According to the circular issued to the shareholders, the board of directors resolved to reduce the stated capital from its current standing of Rs.9.93 billion, down to Rs.2.32 billion. The reduction will be utilised entirely to write off the retained losses amounting to Rs.7.60 billion.

​The latest interim financial statements for the nine months ended December 31, 2025 show the company’s retained earnings standing at a negative Rs.7.63 billion, aligning closely with the proposed write-off amount. The board emphasised that this capital reduction is a technical adjustment and would not impact the number of shares held by any shareholder, nor would it result in any cash distribution. Furthermore, the reduction will not reduce the net asset value of the company, which stood at Rs.3.06 per share as at December 31, 2025.

​The proposed balance sheet cleanup comes amidst a broader turnaround strategy. For the nine months ended December 31, 2025, Softlogic Finance reported a net profit of Rs.12.43 million. The company has also seen an improvement in asset quality metrics during this period, with the impairment charges for loans and other losses dropping significantly to Rs.149.6 million, down from Rs.248.3 million in the corresponding period of the previous year.

​Notably, the company recently achieved full compliance with the regulatory capital requirements. Following the completion of an ‘Alternative Capital Augmentation Plan’—which involved transferring a Rs.1.8 billion loan portfolio to a related party, S R One (Pvt.) Ltd—the Central Bank of Sri Lanka (CBSL) removed the restrictions previously imposed on the company.

​In a note to the financial statements, the company confirmed that the CBSL Governing Board approved the lifting of these regulatory caps on September 19, 2025, after the company met the required core capital and capital adequacy ratios.

​With the regulatory compliance restored and operations showing a profit, the board stated that the primary objective of the capital reduction is to “present a more idealistic financial position”. This restructuring is expected to provide a stable foundation for future operations, specifically restoring the company’s ability to declare dividends and improving its capacity to attract funding for business expansion. (NF)