Rating Details	Rating Type	BFR
	Dissemination Date	Current (23-Dec-22 )	Previous (31-Mar-22)
	Action	Maintain	Initial
	Rating	BFR 2+	BFR 2+
	Outlook	Stable	Stable
	Rating Watch	-	-

Rating Rationale	Factor	Comment
	Ownership	EFGH is primarily owned by EFG Hermes Frontier Holdings LLC having ~51% ownership stakes, while ~44% are owned by individuals and institutions.
	Governance	The board of directors comprises seven members including two independent directors, depicting a sound governance structure. Two board committees with independent representation are also present for ad
	Management and Client Services	The Company has a matrix organizational structure. The management comprises seasoned professionals reporting to their respective group heads. Client servicing is considered strong.
	Internal Controls and Regulatory Compliance	A group internal audit function and international oversight ensures a strong control framework. Dedicated risk management and compliance department is also present.
	Business Sustainability	Revenue from equity brokerage declined by ~48% in 9MCY22 as compared to SPLY. The performance is commendable in the backdrop of ~57% decline in market volumes.
	Financial Sustainability	Trade receivables comprises merely ~5% of equity at end-Sep'22, signifying low credit risk. The market risk is considered low as EFGH does not engage in proprietary book ivestments.

Key Rating Drivers

The assigned ratings consider EFG Hermes Pakistan Limited's ('EFGH' or the 'Company') association with an established international financial services group "EFG Hermes". Leveraging foreign group expertise and oversight, EFGH provides exceptional research services to its clients. A robust multi-layer control framework is present through independent board representation, board committees, and group oversight. Despite CY22 being a challenging year for local equities, EFGH managed to contain the decline in traded volumes compared to the market and sustained its market share during 9MCY22. The continued sponsor support in the form of guaranteed loan arrangements of PKR 825mln provides comfort to the ratings. The sponsor reclassified its inter-company balances to enhance EFGH's equity by ~PKR 118mln. Going forward, the business environment is expected to remain challenging until clarity emerges on the economic front. The rating is dependent on sustainability and improvement in profitability from core income, increasing diversification of the topline, and maintaining market share. Meanwhile, upholding a strong control framework while effectively managing risks remains critical.

About the Entity
	Legal Structure	Listed
	Year of Establishment	27-Sep-99
	Type of License	Trading and Self-clearing
	Majority Ownership	EFG Hermes Frontier Holdings LLC | ~51%

Regulatory Disclosures	Analyst	Applicable Criteria	Related Research
	Afnan Iqbal afnan.iqbal@pacra.com +92-42-35869504 www.pacra.com	Methodology | Broker Fiduciary Rating | Jan-22	Sector Study | Brokerage & Securities | Jan-22

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