The Pakistan Credit Rating Agency Limited
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Madiha Sohail

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PACRA Assigns Initial Entity Ratings to Khadim Ali Shah Bukhari Securities Limited

Rating Type Entity
(26-May-21 )
Action Initial
Long Term BBB+
Short Term A2
Outlook Stable
Rating Watch -

The ratings take into account Khadim Ali Shah Bukhari Securities Limited’s (or the "Company”) emerging position in the brokerage industry. The ratings incorporate the adequate sponsors’ profile, experienced management team and adequate control environment. The Company has recently converted into public unlisted company and is also in process of enhancing its share capital. On governance front, the Company is focusing on improving its Board structure in compliance with CCG. The Company has outsourced its internal audit function and has devised proficient risk assessment procedures. Further, the Company has developed user friendly mobile app and established robust IT infrastructure to provide uninterrupted customer service. The Company has also signed MOU with one of the major microfinance Institute to capture vast universe of retail market. The Company’s current market share stood at ~1.5% and the topline of the Company is concentrated to core brokerage income but management is intended to diversify revenue lines through investment advisory and MFS income. The Company is also intending to increase the branch network and has also filled application with PSX in this regard. The Company is engaged in proprietary trading, albeit the quantum of proprietary investment is very low but exposes the Company to market risk. Zero leveraged capital structure, improved liquidity indicators and recovery in efficiency ratios bodes well for the Company. Furthermore, the Company has adequate capitalization levels with the Net Capital Balance (NCB) of ~PKR 183mln as at 1HFY21 and post capital injection the equity of the Company has reached to ~350mln.
The ratings are dependent on the management’s ability to strengthen revenue base by augmenting consultancy and advisory services. Retaining market share and sustaining profitability from core operations remain critical. Meanwhile, upholding strong internal controls , sound governance structure, retention of key management personnel and diligent monitoring of risks is important

About the Entity
Khadim Ali Shah Bukhari Securities Limited (or “The Company”) (Formerly: Khadim Ali Shah Bukhari Securities Private Limited), incorporated in 2013 as TREC Holder (Trading Rights Certificate) of the Pakistan Stock Exchange. Recently, the Company has converted into public unlisted Company and renamed to Khadim Ali Shah Bukhari Securities Limited. Oxford Frontier Limited is the major shareholder of the Company holding ~44% stake in Khadim Ali Shah Bukhari Securities (Pvt.) Ltd. The Company’s service offering includes Economic and Investment Research, Equity Brokerage, and Financial Advisory service. With its head office based in Karachi, the Company operates through two offices in Karachi. The board of directors (BoD) of the Company comprises two experienced professionals, including the CEO. Both the members are executive directors and are the same members of all board level committees. Mr. Ali Farid Khawaja is chairman of the board. Previously, he was the Partner / Equity Analyst in Autonomous Research LLP, London, Group CFO and Director in Safe charge group PLC and VP, Equity research, Capital market Berenberg Bank London. Mr. Mahmood Ali Shah Bukhari is executive director and is also the Co-Founder of Carnama Pvt Limited. He has been serving on the Board of Directors of Sialkot International Airport (SIAL) since 2012.

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.