PACRA assigns Broker Entity Ratings to Ismail Iqbal Securities (Pvt.) Limited

Ismail Iqbal Securities (Pvt.) Limited (“IISPL” or “the Company”) is primarily engaged in the provision of equity brokerage, alongside offering services of investment advisory and research. IISPL enjoys a good market share of ~2.3% whereas the clientele is fairly diversified between institutions/corporates, HNWIs/Retail, and foreign. The business model of equity brokers is inherently prone to market volatility. Rising interest rates, political uncertainty, and increasing inflationary pressure during FY23 have impeded investors' sentiments, adversely impacting volumetric activity at PSX. However, as the fiscal year 2024 began, there was a noticeable recovery in investor confidence. During 1QFY24, there was a notable surge in market volumes, and IISPL performed in – line with the overall market. The Company earned a revenue of ~ PKR 23mln during 1QFY24(SPLY: ~PKR 19mln). IISPL reported a net profit of ~ PKR 111mln during 1QFY24 (SPLY: a net loss of ~PKR 1mln). The reasons behind the profit increase are twofold: first, there has been a reduction in administrative expenses. Second, a capital gain of ~PKR 82mln was realized in Sep’23. IISPL has an adequate equity base of ~PKR 299mln at end-Sep’23 (SPLY: ~PKR 242mln). The market risk is negligible as the company has now ceased proprietary book trading, resulting in a favorable impact evident in the financial statements at the end-Sep’23. The Company provides prudent services to its clients in the form of complaint management, access to technical and fundamental reports, and a dynamic reporting mechanism which is a strengthening factor. IISPL has a lean organizational structure, with most department heads reporting directly to the CEO. The management is experienced, and the control framework is satisfactory. Adequate risk management and compliance procedures provide support to the ratings. Furthermore, the governance framework could be further improved by appointing independent directors to enhance oversight. As part of its long-term strategic plans, IISPL is diversifying its revenue streams through underwriting, a shift expected to bolster the Company’s future topline growth. The Company has adopted a discipline as a risk management guide for its underwriting business and the management has express intention to adhere to this discipline.
Going forward, pivotal factors for the rating perspective include improvement in core income, management’s ability to retain its market share, and enhancing the volumes and diversity of revenue to improve its competitive position in the brokerage industry. Meanwhile, upholding sound internal controls, retention of key management personnel and diligent monitoring of risks is important.

About the Entity
.Ismail Iqbal Securities (Pvt.) Limited was established in August 06, 2004. The Company operates through two branches, both in Karachi. The Company is owned by three individuals, wherein the majority shareholding (65%) lies with the CEO - Mr. Ahfaz Mustafa. The Company’s board of directors comprises two experienced individuals including the CEO - Mr. Ahfaz Mustafa. The other director, Mr. Muhammad Taufique is a non-executive director and provides governance oversight. The Company has appointed M/s Baker Tilly Mehmood Idrees Qamar – Chartered Accountants as the external auditors.