Press Release     
PACRA assigns Initial Broker Fiduciary Rating to Arif Habib Limited.
Date: 29-Sep-21

Rating Details Rating Type Broker Fiduciary Rating
Current
29-Sep-21
Previous
--
Action Initial --
Rating BFR 1 --
Outlook Stable --
Rating Watch - --

Rating Rationale Factor Comment
Ownership The Company is majorly corporate backed with 69% stake lies with Arif Habib Corporation Limited. Mr. Arif Habib hold 3% stake. Whereas, the general public (local & foreign) hold 21% of the shares.
Governance The Board comprises of seven directors including chairman and CEO. The Board is completely complied with CCG Reg'2019 and posses manifold experience in relevant field.
Management and Client Services The Company has well-defined departmentalization headed by seasoned professionals. The Company has well drafted policies in place to ensure high quality of client service.
Internal Controls and Regulatory Compilance The internal audit department, overseen by the audit committee, ensures compliance with the policies and procedures of the Company and strengthen the effective control environment.
Business Sustainability The revenue stream of the Company is well diversified among brokerage income, investment banking, Money Market, Forex and Commodities Trading.
Financial Sustainability The Company has strong capitalization indicators owing to the managed leveraging. However, the Company is exposed to market risk due to its proprietary investments.

Key Rating Drivers The assigned rating manifests the Arif Habib Limited’s (“AHL” or “The Company”) association with astute sponsors ‘Arif Habib Group', one of the prominent conglomerates in the country. The leading position of the Company emanates from its well-diversified revenue stream, stable market share, extensive outreach, and strong operational control environment. AHL has a well-experienced management team, sound governance framework, and well-established compliance protocols which bodes well for the rating. In addition to brokerage, AHL achieved a distinct position in the advisory domain in Pakistan, resulting in a diversified revenue base and a competitive edge over peers. The Company has maintained a sizeable number of investors’ accounts including Institutional, HNWIs, and Retailers. AHL has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML, CFT, and whistleblowing policies. The Company has largely been exposed to market risk due to its sizeable proprietary trading book. Related risks are deterred through well-defined investment policies. During FY21, the Company posted its highest core profitability with net profits at ~PKR 2.1bln (FY20: ~PKR: 73mln), owing to record volumes achieved at PSX. The profits stem from well-diversified revenue streams bifurcated among brokerage income, advisory income, and capital gains. The equity base of the Company amounted to ~PKR 5bln as of the end FY21. Whereas, the Net Capital Balance of the Company reached up to ~PKR 1.9bln as at end-Jun'21.

About the Entity
Legal Structure Listed
Year of Establishment 07-Sep-04
Type of License Trading and Clearing
Majority Ownership Arif Habib Corporation Limited

Regulatory Disclosures Analyst Applicable Criteria Related Research
Muhammad Junaid
muhammad.junaid@pacra.com
+92-42-35869504
www.pacra.com

Methodology | Broker Fiduciary Rating | Jan-21

Sector Study | Brokerage & Securities | Jan-21

Disclaimer 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. 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 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.