PACRA Maintains Broker Management Rating of Abbasi and Company (Pvt.) Ltd
|Rating Type||Broker Management|
Abbasi and Company (Pvt.) Limited ("ACPL" or "The Company") mainly provides the services of equity brokerage and research. The assigned rating reflects a strong internal control framework, satisfactory risk management, and compliance with regulatory affairs. The Company has established rigorous protocols regarding risk assessment by implementing KYC/AML, CFT, and other clearly defined policies. ACPL's Internal audit department is outsourced to an audit firm which further strengthens the control environment. The Company has devised a comprehensive Disaster Recovery and business continuity plan to tackle any uncertain events. The Company has an efficient transaction execution and monitoring process in place. The rating takes note of ACPL's well-developed organizational structure with a qualified and experienced management team. The clients have been provided with the facilities of online trading/dedicated trader, regular transaction updates, and access to research reports. A dedicated customer support department is also present to resolve the client’s grievances. The rating incorporates the strong business acumen of Mr. Muhammad Ismail Abbasi who is associated with the financial industry for more than ~35 years. However, the governance framework may be enhanced further by increasing the board size and the inclusion of independent insight. The average market share of ACPL hovers in the range of ~0.5% to ~1%. The primary source of revenue stems from equity brokerage which lacks diversity, resulting in rating constraints. The Company has earned brokerage revenue of ~PKR 39mln for 9MFY22 (SPLY: ~PKR 60mln). The decline came on the back of lower market volumes in the last six months of the reporting period. Unrealized losses of ~PKR 16mln on prop-book further dragged down the profitability and resulted in a loss of ~PKR 31mln for 9MFY22. The Company has reasonable equity of ~PKR 423mln at end-Mar’22 which is a comforting factor. A low leverage capital structure provides support to the rating.
Going forward, sustainability of market share, revenue, and profitability will remain imperative, while upholding strong internal controls and risk management framework and retention of key management is critical. Further, rational diversification of business activity may provide support to the company’s overall financial risk profile.
Abbasi and Company (Pvt.) Limited was incorporated in 1999 as a private limited company. ACPL is a licensed TRE certificate holder of the Pakistan Stock Exchange and a member of Pakistan Mercantile Exchange Limited. In 2017, the Company became a registered research entity. ACPL’s service offering includes equity and commodity brokerage and equity research. The majority of shares are owned by the CEO, Mr. Syed Muhammad Ismail Abbasi who owns 69.7% of the ownership. The board of directors consists of three directors, all representing the family members. The CEO, Mr. Syed Muhammad Ismail Abbasi possesses diversified experience in capital markets. He is serving on the Board of Directors of ACPL as a Chief Executive since its incorporation. He is also serving as chairperson of the Board. The external auditors of the Company are M/s Parker Randall – A.J.S and Company Chartered Accountants, classified in the ‘B’ category of the State Bank of Pakistan panel of Auditors.