The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of Alfalah CLSA Securities (Pvt.) Limited

Rating Type Entity
(29-Apr-22 )
(04-May-21 )
Action Maintain Maintain
Long Term A- A-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Alfalah CLSA Securities (Pvt.) Limited (“ACLSA” or “The Company”) mainly provides the services of equity brokerage while income from corporate finance also adds to the topline. With an average market share of ~6.5%, the clientele of the Company is fairly diversified between institutions/corporates and HNWI’s/Retail. In line with the improving market volumes in CY21 the brokerage revenue of ACLSA has also depicted an increase of ~30% to stand at ~PKR 287mln (CY20: ~PKR 120mln). ACLSA also posted some growth in its revenues from investment banking; nevertheless, the topline continues to feature significant reliance on brokerage commissions, and accordingly there remains room for improvement in the revenue diversification domain. The average traded volumes during CY21 registered an upward trajectory and improved by ~44% to ~474mln shares (CY20: ~330mln) depicting an increased participation in the equity market led by increasing investor confidence and the global COVID-19 vaccine rollout. Accordingly, the bottom-line also surged by ~PKR 32mln to stand at ~PKR 61mln (CY20: ~PKR 29mln). The market risk is negligible as the Company does not invest in equity securities. During CY21, utilization of short-term borrowing lines reduced to NIL, which shows company's low reliance on short term lines owing to better liquidity management. The Company has a well-defined organizational structure with most of the heads reporting directly to CEO. The rating incorporates seasoned management and adequate control framework which may be improved with the presence of a dedicated Risk Management Department. Moreover, the governance framework may be enhanced further with the induction of independent directors for an increased oversight. As part of the long-term plan the Company intends to capture retail clientele with the use of digital platforms.
The rating is dependent on the Company's ability to leverage its association with CLSA to attract foreign investors. Maintaining a strong financial profile and retention of key human resources remains important. Meanwhile, improving profitability and maintaining market share is critical.

About the Entity
Alfalah CLSA Securities (Pvt.) Limited ("Alfalah CLSA" or ''The Company") is a Private Limited Company and holds the Trading Rights Entitlement Certificate (TREC) from Pakistan Stock Exchange - PSX. The Company is licensed from Securities and Exchange Commission of Pakistan. The Company was incorporated on 23rd September 2003 under then Companies Ordinance, 1984 and commenced its operations on 25th March 2004. The Company is primarily engaged in the business of equity brokerage, investment banking/corporate finance and research. Bank Alfalah Limited owns ~61% of the shares while ~25% shares are vested with CLSA Limited. The Chairman, Mr. Aliuddin Ansari, holds ~11% and the CEO, Mr. Atif Mohammad Khan holds remaining ~2% of the stakes. The Company's board is comprised of six members, including the CEO. Three board members represents Bank Alfalah Limited while Mr. Edward Park, represents CLSA. All the directors except CEO are non-executive. Mr. Aliuddin Ansari is entrusted with the responsibility of Chairman of the board.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.