Colombo, 02 September 2026 – Asia Capital PLC (ACAP) has issued a monthly announcement to the Colombo Stock Exchange (CSE), confirming persistent qualified audit opinions in its Annual Reports for the financial years ended 31 March 2024 and 31 March 2025. The company’s securities have been on the CSE’s Watch List since October 2024, a status further compounded by the continuous audit concerns, leading to a suspension of trading from 16 January 2026.
Background: Watch List Status and Audit Qualifications
Asia Capital PLC was initially transferred to the CSE Watch List with effect from 15 October 2024, following a qualified opinion in the Independent Auditor’s Report for the year ended 31 March 2024. This was subsequently exacerbated by a similar qualified opinion for the year ended 31 March 2025, which was added as a reason for its continued Watch List presence from 16 September 2025.
The core issues leading to these qualified opinions revolve around two critical areas: the going concern assumption and the impairment of investments.
Basis for Qualified Opinion – Period Ended 31 March 2024:
- Going Concern: The Group reported a net loss of Rs. 533 million (2023: Rs. 759 million) and accumulated losses of Rs. 4,126 million as of 31 March 2024. The Company also incurred a net loss of Rs. 279 million, with accumulated losses of Rs. 1,526 million. Both the Group’s and Company’s net assets were negative and below 50% of stated capital, triggering a “serious loss of capital” under Section 220 of the Companies Act. Auditors were unable to conclude on the appropriateness of the going concern assumption due to a lack of financial support evidence, such as a letter from the major shareholder.
- Impairment of Investments: The Company held significant investments in subsidiaries (Rs. 1.77 billion), associates (Rs. 399 million), goodwill (Rs. 305 million), and related party receivables (Rs. 2.06 billion). Auditors noted indications of potential impairment for investments amounting to Rs. 1 billion that were not generating adequate returns. They were not provided with reliable cash flow forecasts, approved budgets, or business proposals to verify the net realizable value or determine necessary impairment adjustments, especially given the volatile market and current economic conditions in Sri Lanka.
Basis for Qualified Opinion – Period Ended 31 March 2025:
- Going Concern: The Group’s accumulated losses further increased to Rs. 4,352 million, while the Company recorded accumulated losses of Rs. 1,463 million. The Group’s net assets remained negative at Rs. 724 million, still below 50% of stated capital, again triggering a serious loss of capital. Similar to the previous year, auditors lacked evidence of financial support from the major shareholder, preventing a conclusion on the going concern assumption.
- Impairment of Investments: As of 31 March 2025, investments in subsidiaries and associates amounted to Rs. 1,615 million and Rs. 399 million, respectively, with goodwill at Rs. 305 million and related party receivables at Rs. 2,412 million. The investment of Rs. 1,615 million in subsidiaries showed potential impairment. Auditors were again unable to obtain the necessary information, such as reliable cash flow forecasts and approved budgets, to validate the net recoverable value and assess potential impairment adjustments.
Asia Capital’s Strategic Remedial Actions
In response to these critical audit findings, Asia Capital PLC’s Board of Directors has initiated several strategic measures aimed at strengthening the Company’s financial position and restoring its capital structure by 31 December 2026. These include:
- Capital Restructuring Initiative: The Board is deliberating a proposal to restructure a portion of its loan facilities, particularly those previously advanced through an External Borrowing Account. This move aims to strengthen the balance sheet, reduce debt obligations, and improve the overall financial position.
- Shareholder Engagement: Discussions are ongoing with relevant shareholders to finalize the terms and timelines for implementing the proposed restructuring.
- Operational Efficiency and Cost Reduction: Measures are being implemented across the Group to enhance operational efficiency, reduce operating costs, and improve financial sustainability through rationalization of expenditures and optimization of processes.
- Sales Force Restructuring: To boost revenue generation and market responsiveness, the Group has restructured its sales and business development functions, realigning responsibilities, strengthening client engagement, and introducing performance-driven structures.
- Company Valuation: A valuation exercise is underway to determine an appropriate share issue price for the proposed restructuring.
- Regulatory Approvals: The Company intends to seek necessary approvals from the CSE and the Securities and Exchange Commission of Sri Lanka (SEC) to ensure compliance with regulatory requirements for its restructuring plan.
Implications Under CSE Listing Rules
Asia Capital PLC has also highlighted the stringent implications under CSE Listing Rule 7.5(d)(ii)(A)(5)(d):
- Any deviation from the proposed remedial action must be communicated to investors via a CSE announcement within one market day of Board approval for such deviation.
- As the matters giving rise to the qualified audit opinion were not resolved within fifteen months of the securities being transferred to the Watch List, trading of ACAP securities was suspended with effect from 16 January 2026.
- Should the trading suspension continue for a period exceeding twelve months, the securities of Asia Capital PLC will be delisted by the CSE Board of Directors in terms of Rule 14 of the Listing Rules.
- Conversely, if the qualified audit opinion issues are resolved and independently verified by an auditor while the Company is on the Watch List, this fact will be announced to the market via the CSE forthwith.
The Board of Directors of Asia Capital PLC has affirmed its commitment to addressing the highlighted issues and expressed its utmost priority to achieve an unqualified audit opinion for the financial year ending 31 March 2026, ensuring that future financial statements accurately reflect the organization’s true financial position and performance.
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