PACRA Maintains Broker Entity Ratings of Dawood Equities Limited

Dawood Equities Limited (DEL” or “the Company”) focuses primarily on delivering equity brokerage services as its core product portfolio. Concurrently, the company exhibits diversification by engaging in underwriting. DEL enjoys an adequate market share whereas the clientele is diversified between corporate/Institutional and Retail/HNWIs. Challenging economic conditions in Pakistan have had a notable impact on investor sentiment within the market, particularly in FY23, leading to a decrease in market activity levels and profitability. During FY23 DEL’s revenue declined by 62% to ~ PKR 44mln (SPLY: ~PKR 116mln) on account of low market volumes due to low investor interest. The Company reported a net loss of ~ PKR 14mln (SPLY profit of ~PKR 16mln) where the decrease is mainly due to a decrease in underwriting commission and lower brokerage revenue. The Company has an adequate equity base of ~PKR 254mln at end-Jun’23 (SPLY: ~PKR 283mln). The Company’s limited investment in equity securities amounted to ~PKR 52mln which exposes it to limited market risk. DEL has a well-developed organizational structure, with most department heads reporting directly to the CEO. The Company has a strong governance structure supported by the presence of independent directors and board-level committees. The ratings take comfort from an experienced and qualified management team. The client services are adequate, supported by a research analyst while the strength of the research department may be enhanced. The control framework is deemed satisfactory, primarily attributed to the presence of a dedicated risk management department within the Company. Moreover, DEL has outsourced its internal audit department to Reanda Haroon Zakaria & Company which strengthens the Company's control framework. As a part of long-term strategic plans, DEL is considering diversifying its presence in areas where a higher influx of potential clients is anticipated. Furthermore, DEL’s approach to branch expansion is based on a franchise model. The inherent structure of this model is expected to result in limited expenses, which will aid the Company’s bottom line going forward. The improvement of the technological platform is also under consideration.
Going forward, the company will focus on revenue diversification and geographical expansion, ensuring the sustainability and enhancement of market share, and improvement in profitability, thereby bolstering its competitive stance in the brokerage industry. Simultaneously, it is imperative to uphold robust internal controls, retention of key management personnel, and diligently monitor risks.

About the Entity
Dawood Equities Limited was incorporated under the Companies Ordinance 1984, on May 3, 2006 as public limited company. The Company obtained listing on Pakistan stock Exchange in 2008. Mr. Ayaz Dawood owns 19% stake in the Company followed by Equity International (Pvt.) Limited (11%). The Company’s service offering includes economic and investment research, equity brokerage, and corporate finance & financial advisory services. The Company operates through seven branch offices, located in Karachi, Hyderabad, Lahore, Faisalabad and Sargodha, reporting to the Head Office in Karachi. Mr. Aziz Habib is the CEO of the Company having diverse experience brokerage business. The Company’s Board of Directors (BoD) comprises seven members, which include two independent directors, four non-executive directors and one executive director including a female director in conformity with the Code of Corporate Governance (CCG).