Pakistan Credit Rating Agency (PACRA) has upgraded the entity ratings of Ismail Iqbal Securities Private Limited to ‘A-‘ for long term and ‘A2’ for short term, with a ‘stable’ outlook forecasted.
Previously on June 23rd 2017, the entity ratings were maintained at ‘BBB-‘ for long term and ‘A3’ for short term, with a ‘stable’ outlook forecasted.
According to PACRA, The entity ratings take into account the sponsor’s firm commitment to maintain the company’s equity in case of erosion and/or to meet any capital call arising from underwriting commitments through injection of funds in a timely manner.
Moreover, the ratings take into account the steps taken by the management to fortify risk management framework through establishment of board level committees and segregating risk and compliance function.
PACRA further informed that the corporate governance framework is adequate and the company plans to induct an independent director on the board in 2HCY18.
According to the press release issued by PACRA, “The Company’s revenue stream comprises brokerage income, underwriting business, and net gain from the proprietary trading. The trading in proprietary book creates perception of conflict of interest and there could be high variation in earnings linked to the volatility of the stock market.”
“The rating is dependent on sustainability of profitability through core activities of brokerage and underwriting. The majority of revenue emanates from HNWIs but the management has devised a suitable plan to increase its focus towards local institutional clients. Upholding strong internal controls and diligent monitoring of risks is critical. Erosion in equity base due to losses that is not timely replenished as committed by the sponsor will result in downgrade. Adherence to agreed parameters regarding investment policy and underwriting commitments is crucial,” added PACRA.
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 – and 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.