Analyst
Ayesha Qasim
ayesha.qasim@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of Ismail Iqbal Securities (Pvt.) Limited
Rating Type | Entity | |
Current (23-Jun-17 ) |
Previous (06-Oct-16 ) |
|
Action | Maintain | Maintain |
Long Term | BBB- | BBB- |
Short Term | A3 | A3 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings reflect modest positioning of the company in the brokerage industry. This is supplemented by IISL's small equity base, which has grown over the year, and proportionate net capital balance (NCB). IISL's revenue depicts a tilt towards High Net worth Individuals (HNWIs); contribution of corporate and foreign clients is meager. Customer concentration is high though longevity of the relationship alleviates the associated risks. The company has achieved reduction in trade debts. The company makes profit from core brokerage business. IISL has strengthened its compliance department by separating its role. The business plan envisages deepening of inroads into existing clientele while focusing on foreign clients and underwriting business. IISL has adequate research function which covers macroeconomic trends and limited number of scripts. The company maintains proprietary book which possess a market risk. During the year, capital gains booked on the proprietary book contribute a significant portion towards net profit. The company is also exposed to credit risk arising from credit facility given to individual clients.
The ratings are dependent on the company’s ability to improve and diversify its core operating revenues in order to further strengthen its relative positioning in the industry. Meanwhile, strengthening of governance framework in accordance with the new regulation would be important. Moreover, managing credit risk and effective utilization of investment float remain imperative.
About
the Entity
IISL, with commercial operations starting in Aug'04, operates through 2 branches, both in Karachi. Its main activities include equity brokerage and underwriting. Being a private limited company, IISL is owned by three individuals, wherein the majority shareholding (65%) lies with the CEO - Mr. Ahfaz Mustafa and remaining stake is equally held by siblings. The family represents Ismail Iqbal group. The family is also engaged in education, logistics, and packaging. The company's auditors are Baker Tilly Mehmood Idress Qamar. They are on the panel of auditors maintained by the State Bank of Pakistan.
The board comprises two members, including the CEO and his elder brother (Mr. Azhar Iqbal). Mr. Mustafa carries close to a decade experience in the equity trading. He is supported by a capable team.