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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 Maintains Entity Ratings of EFG Hermes Pakistan Limited

Rating Type Entity
Current
(28-Dec-18)
Previous
(30-Jun-18)
Action Maintain Maintain
Long Term A- A-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

The ratings reflect the company’s association with an international financial services provider, EFG Hermes, and its emerging position in Pakistan’s brokerage industry. Strong sponsor support, robust governance framework and internal control environment gives support to the ratings. The company has a well-designed organizational structure, with the senior management reporting to the respective heads at group level. Ongoing efforts have been put for full integration of the group’s policies at company level. The company’s research department has foreign alliance and is centralized in U.A.E. As a group policy, the company does not engage in proprietary trading which keeps the market risk low. Due to lackluster market performance in CY18, the company suffered a net loss of ~PKR 29mln in 9MCY18. The equity base of the company stood at ~PKR 201mln at end Sep-18, which gives modest capacity to absorb financial risk.
Improvement in profitability, continuous monitoring of risk related parameters and retention of key human resource will bode well for the company. Meanwhile, maintaining its competitive position in the industry through diversification and volume based enhancement in revenues is critical for ratings.

About the Entity
EFG Hermes Pakistan Limited (Formerly Invest & Finance Securities Ltd.), a public listed company, licensed under Securities Brokers (Licensing and Operations) Regulations, 2016 as a securities broker and provides securities research and brokerage services to institutional and individual clients. It is also engaged in investment banking activities. The company is 51% owned by EFG Hermes Frontier Holdings LLC, which is wholly owned subsidiary of EFG Hermes Holding S.A.E. EFG Hermes has presence in the Middle East and North Africa (MENA) region and specializes in asset management, securities brokering, investment banking, private equity and research. EFG Hermes is the first foreign investment bank and securities broker to have physical presence in Pakistan. The company operates from its head office based in Karachi, Pakistan.

During the second half of CY18, the company’s CEO resigned and was replaced by Mr. Shahid Kamal (acting CEO). The company has fourteen board members, including the CEO, of which four are independent. The board meets on quarterly basis to review the business performance.

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.