The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Maintains Entity Ratings of KTrade Securities Limited

Rating Type Entity
(22-Nov-22 )
(22-Nov-21 )
Action Maintain Upgrade
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

KTRADE Securities Limited (“KTRADE” or the “Company”) is an emerging brokerage house re-launched in 2018 with an aim to provide technology-driven and innovative products to the retail investors. KTRADE mainly provides the services of equity brokerage. The business model of equity brokers is inherently prone to market volatility. During FY22, rising inflation and interest rate environment impaired the investors sentiments, resulting in a decline of volumetric activity at PSX. Consequently, the traded volumes of KTRADE also suffered and fell by ~32% in FY22 on YoY basis. KTRADE earned commission on equity brokerage of ~PKR 119mln in FY22 as compared to ~PKR 158mln in FY21 reflecting a reduction of ~PKR 39mln or ~25%. However, to augment the revenue stream, KTRADE has setup the corporate finance department for advisory services for which the license was acquired in CY21. KTRADE has earned ~PKR 6mln in terms of advisory revenue in FY22. The services of margin trading/financing are also available; however, the quantum is minimal. With an aim to provide technology-driven and innovative products to the retail investors, KTRADE is aggressively investing in its technological platform and human capital for the purpose of enhancing the user base. This is reflected in the administrative and operating expense which has increased by ~PKR 107mln or 65% in FY22 on YoY basis. KTRADE has suffered a loss of ~PKR 116mln in FY22 primarily due to an upsurge in operating expenses. To support the expansion strategy, further equity has been injected during FY22. The Company’s equity stands at ~PKR 533mln at end-Jun’22. The ratings incorporate the sponsors’ business acumen, seasoned management team and a strong control environment. KTRADE has outsourced its internal audit function and has devised proficient risk assessment procedures. Recently, the Company has also strengthened its governance framework with the addition of two independent directors. The rating takes comfort from a low leveraged capital structure.
The ratings are dependent on the management’s ability to strengthen revenue base by augmenting consultancy and advisory services. Improvement in market share and sustaining profitability from core operations remain critical. Meanwhile, upholding strong internal controls, sound governance structure, retention of key management personnel and diligent monitoring of risks is important

About the Entity
KTRADE Securities Limited incorporated in 2013 as TREC Holder of the Pakistan Stock Exchange. Recently, the Company has converted into public unlisted Company and renamed to KTRADE Securities Limited. Oxford Frontier Capital Limited is the major shareholder of the Company holding ~60% of the ownership. The Company’s service offering includes Economic and Investment Research, Equity Brokerage, and Advisory service. With its head office based in Karachi, the Company operates through four offices, one in Multan, one in Lahore and two in Karachi. The board of directors (BoD) of the Company comprises five experienced professionals, including the CEO and three independent directors.

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.