The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Broker Management Rating of Alfalah CLSA Securities (Pvt.) Limited

Rating Type Broker Management
(29-Apr-22 )
(04-May-21 )
Action Maintain Maintain
Long Term BMR2+ BMR2+
Short Term - -
Outlook Stable Stable
Rating Watch - -

Broker Management Rating of Alfalah CLSA Securities (Pvt.) Limited (“ACLSA” or “The Company”) reflect its association with CLSA (24.9% shareholder) - a wholly owned subsidiary of CITIC Securities, the largest investment bank in China. The rating incorporates the Company's strong sponsor support, sound governance framework, seasoned management team, and well-established compliance protocols. The governance framework may be enhanced further with the induction of certified independent directors resulting in formation of board sub-committees in addition to the Audit Committee. ACLSA has matrix organizational structure, with clear reporting lines for respective heads. The Company has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML, CFT and whistle blowing policies. ACLSA has outsourced its internal audit department which strengthens the internal control framework. Formation of an independent risk management department is encouraged. The IT infrastructure allows full integration of the front and back-office functions, allowing generation of real time reports. As a policy, the Company does not take propitiatory exposure, which reduces conflict of interest and minimizes exposure to market risk. The Company has a distinct position in international brokerage income, which illustrate competitive advantage over peers. 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). 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). 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.