The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Maintains Entity Ratings of Ismail Iqbal Securities (Pvt.) Limited

Rating Type Entity
(27-Feb-19 )
(29-Aug-18 )
Action Maintain Upgrade
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect the company’s compliance against its investment policy and other agreed parameters by shareholders. Ismail Iqbal Securities has a clearly designed organizational structure with all departmental heads reporting to the CEO. The management intends to strengthen the board structure by increasing the size of the board and inducting independent director/s along with improving its risk management framework. Ismail Iqbal Securities (Pvt.) Ltd has a 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 assigned ratings take into account the company's high exposure to market risk due to its investment book, dominated by investments in quoted securities. This may lead to perception of conflict of interest but the management has put processes in place to manage it. The ratings incorporate the company's efforts to increase its foot print in the corporate finance and advisory domain. The performance of the company is under pressure due to operating losses, on the back of low volumes in equity market, eventually impacting its equity. Furthermore, the company has adequate capitalization levels with net capital balance of ~PKR 205mln at end Dec-18.

The ratings are dependent upon the management's ability to improve its operating revenues to stem the losses. Meanwhile, better governance framework, careful monitoring of market risk and conflict of interest remain critical. Retention of key personnel and continuous improvement in customer servicing tools will bode well for the company. Any significant drop in revenues leading or persistent losses will affect the ratings negatively.

About the Entity
Ismail Iqbal Securities (Pvt.) Limited, with commercial operations starting in Aug'04, operates through one branch in Karachi. Its main activities include equity brokerage and underwriting. Being a private limited company, it 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, engaged in education, logistics, and packaging businesses. The company's 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 CEO while Mr. Azhar Iqbal 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.