The Pakistan Credit Rating Agency Limited
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Ahmed Sheikh

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PACRA Upgrades Entity Ratings of Alfalah Securities (Pvt) Limited

Rating Type Entity
Action Upgrade Initial
Long Term A- BBB+
Short Term A1 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect Alfalah Securities association with Bank Alfalah Limited (BAFL). The Company is currently a majority owned subsidiary of Bank Alfalah. The company went through a re capitalization lately and now has a new management. The team, experienced in respective functions has prepared a comprehensive strategy. It has performed in line with the business plan approved by the board. The company has successfully improved its brokerage revenue to achieve operational breakeven. The operating revenue was further supported by progression in investment advisory business. Market share of Alfalah Security has increased over time. The company has diversified the brokerage revenue by effectively placing itself in the international market. Currently, the company has several international brokers on its panel and plans to increase this. The company has a strong research department which is efficiently co-integrated with the online portal and provides technical and fundamental analysis of the listed companies. Ratings draw comfort from the company's policy not to undertake equity proprietary trading which reduces market risk and negligible credit risk due to transactions through ready cash only. The insignificant credit risk arises from transactions with corporate and foreign clients.

The ratings are dependent on the company's ability to build a reasonable market share in the highly competitive brokerage industry. Sustainable and organic growth in revenue and maintaining operational break even is important. At the same time, retention of key human resources remains imperative.

About the Entity
Alfalah Securities, with commercial operations started in Mar'04, remained dormant for some years after 2008 financial meltdown. The company revamped its structure and management through sponsor support in Jun'15. Alfalah Securities operates through head office in Karachi with no other branch. Its main activities include equity brokerage, investment advisory and research. BAFL is the major shareholder of Alfalah Securities, holding ~98% of the shares. During CY16, BAFL intend to divest 30% skate in Alfalah Securities. In this regard SPA has been signed between BAFL, Mr. Atif Khan and Mr. Aliuddin Ansari.

The board of Alfalah Securities comprises five experienced professionals, including CEO. Four members represent BAFL whilst Mr. Mizra Zafar, CFO of BAFL is the chairman of the board. An independent Advisory board has been established to provide a unique advantage to the Investment Advisory Department. Mr. Atif Khan, the CEO, carries over two decade of experience in the financial sector, especially brokerage. He is supported by an able team.

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.