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The Pakistan Credit Rating Agency Limited
Press Release

Date
28-Dec-18

Analyst
Shahzaib Khalid
shahzaib.khalid@pacra.com
+92-42-35869504
www.pacra.com

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Assigns Initial Broker Management Rating to Ismail Iqbal Securities (Pvt.) Limited

Rating Type Broker Management
Current
(28-Dec-18 )
Action Initial
Long Term BMR3
Short Term -
Outlook Stable
Rating Watch -

The rating reflects Ismail Iqbal Securities (Pvt.) Ltd's (IIS) modest market share in the brokerage industry. The company's focus remains on high net-worth individuals and ancillary business from big brokerage firms. The rating assigned to IIS takes into account its improving risk framework, adequate organizational structure, and IT infrastructure. IIS has a clearly designed organizational structure with all departmental heads reporting to the CEO. Governance framework needs to be strengthened, as the company has no independent director on its board. The company has high exposure to market risk due to investment book, dominated by investments in liquid securities. This may lead to perception of conflict of interest but the management has put processes in place to manage it. The rating incorporates the company's efforts to increase foot prints in corporate finance and advisory domain. Ongoing efforts have been put into establishing and implementing risk management and compliance policies, which mitigate the risks inherent to the brokerage industry to certain extent. Furthermore, the company has adequate capitalization levels with the net capital balance of ~PKR 204mln as at end June-18.

The rating is dependent upon the management's ability to improve governance framework, careful monitoring of market risk and conflict of interest, emanating from investment activities. Retention of key personnel and continuous improvement in customer servicing tools will bode well for the company. Any significant drop in the volumes and resulting fee income will affect the rating negatively.

About the Entity
Ismail Iqbal Securities (Pvt.) Limited, with commercial operations starting in August 04, operates through one branch, in Karachi. Its main activities include equity brokerage equity brokerage and underwriting. The company is owned by three individuals, wherein the majority shareholding (65%) lies with the CEO, Mr.Ahfaz Mustafa. The remaining stake is equally held by his siblings. The family represents Ismail Iqbal Group, which has presence in confectionery, education, logistics, and packaging businesses. The company's external auditors are Baker Tilly Mehmood Idress Qamar.

The company's board comprises two experienced individuals including the CEO and his elder brother Mr.Azhar Iqbal (non-executive director). Executive decision making rests with the CEO, while the non-executive director provides governance oversight.

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.