The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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

Rating Type Entity
Action Maintain Upgrade
Long Term A- A-
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Ismail Iqbal Securities (Pvt.) Limited (“IISPL” or the “Company”) is primarily engaged in the provision of equity brokerage service with a modest market share. The Company has also initiated the underwriting service recently to augment its revenue stream. The assigned ratings incorporate the Company’s reviving performance on the back of rising volumes and improved macro-economic indicators. The Company earned brokerage revenue of ~PKR 157mln during FY21 (FY20: PKR 65mln), consequently the losses turned into a profit of PKR 48mln in FY21 (FY20: PKR 37mln). The Company's equity stood at ~PKR 326mln at end-Jun'21 (Jun'20: ~PKR 278mln) depicting an increase of ~17%. However, the market share of the Company remained stagnant at ~2% during FY21. The Company has a low leveraged structure supported by sponsor’s loan which is well covered by liquid assets. At end-Jun’21, the proprietary book constituted ~56% of the Company’s equity (~PKR 326mln) to stand at ~PKR 182mln. This exposes the Company to a higher level of market risk and also results in conflict of interest. However, the management has implemented adequate measure to cope with this risk. The Company has adequate capitalization levels with the net capital balance standing at ~PKR 153mln at end-Jun’21. The Company provides prudent services to its clients in the form of complaint management, access to technical and fundamental reports and a dynamic reporting mechanism which is strengthening factor. The assigned ratings are reflective of the Company’s lean organizational structure where most of the heads directly reports to the CEO. Seasoned top management, sound risk management and compliance procedures provide support to the rating.
The ratings would remain dependent on meeting the benchmarks assigned by PACRA, i) cessation of proprietary book, ii) increase the equity to PKR 350mln over the near future depending upon the quantum required. The management's ability to retain its market share and enhance the volumes and diversity of revenue to improve its competitive position in the brokerage industry would be a positive factor. Retention of key personnel, maintaining strong controls, commitment towards agreed parameters and sustainability of profits will remain critical.

About the Entity
Ismail Iqbal Securities (Pvt.) Limited was established in August 06, 2004. The Company operates through two branches, both in Karachi. The Company is owned by three individuals, wherein the majority shareholding (65%) lies with the CEO - Mr. Ahfaz Mustafa. The remaining stakes are owned by Ms. Ayesha Naeem and Mr. Azhar Iqbal 17.5% each. Mr. Ahfaz Mustafa has nearly 12 years of experience in the equity market. Mr. Fahad Rauf - Head of Research is an MBA and CFA candidate (Level-3) has over 7 years of extensive experience in the areas of Equity Research, Economic Research, Financial Modeling & Valuations. IISL’s board of directors comprises three experienced individuals including the CEO - Mr. Ahfaz Mustafa. The other director, Ms. Ayesha Naeem is a non-executive director and provides governance oversight. An independent director was also taken on-board during CY-21 which would further add value to 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.