Rating Details	Rating Type	BFR
	Dissemination Date	Current (13-Jun-22 )
	Action	Initial
	Rating	BFR 3
	Outlook	Stable
	Rating Watch	-

Rating Rationale	Factor	Comment
	Ownership	The CEO, Mr. Ahfaz Mustafa owns the majority shareholding of ~65%. Remaining stakes are divided among family members.
	Governance	The board is comprised of two members including Mr. Ahfaz Mustafa. The board size may be enhanced further to improve governance structure.
	Management and Client Services	Organizational structure commensurate with scale of operations. Clients have been provided with online trading and research services.
	Internal Controls and Regulatory Compliance	Presence of internal audit, independent compliance function and well-defined policies may strengthen the internal controls.
	Business Sustainability	Major part of revenue emanates from equity brokerage; diversification may provide support to the topline.
	Financial Sustainability	The prop-book which constitutes ~37% of equity results in market risk exposure. A low leveraged capital structure brings comfort to the rating.

Key Rating Drivers

Ismail Iqbal Securities (Pvt.) Limited (“IISPL” or “the Company”) operating through its head office in Karachi, primarily caters to domestic HNWI and Institutional clients. The assigned rating incorporates a lean organizational structure comprising of a seasoned team. The Company has provided its clients access to online trading and in-house research reports. Client services may be enhanced by introducing a dedicated customer service department and complaint management system with tracking functionality. The rating takes into account an adequate internal control framework which could be improved with the presence of an internal audit function. Separation of compliance function from finance is important from the ratings perspective. An independent risk management function may be considered in line with increasing business quantum. Moreover, room for improvement exist with respect to the development and implementation of well-defined policies. The topline has shown improvement in recent years; however, diversification in product slate is important. Presence of prop-book results in a volatile bottom-line and erosion in equity and a potential conflict of interest. There is a need to enhance the equity base while a low leveraged capital structure brings comfort to the rating. The governance framework can be improved with the inclusion of an independent insight. The rating incorporates the long-standing experience of the sponsor. Going forward, sustainability and improvement in profitability from core operations is critical.

About the Entity
	Legal Structure	Private Limited
	Year of Establishment	06-Aug-04
	Type of License	Trading and Self-clearing
	Majority Ownership	Mr. Ahfaz Mustafa (~65%)

Regulatory Disclosures	Analyst	Applicable Criteria	Related Research
	Afnan Iqbal afnan.iqbal@pacra.com +92-42-35869504 www.pacra.com	Methodology | Broker Fiduciary Rating | Jan-22	Sector Study | Brokerage & Securities | Jan-22

Disclaimer

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