Press Release
Date: 13-Jun-22
PACRA Assigns Initial Broker Fiduciary Rating to Ismail Iqbal Securities (Pvt.) Limited

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

Methodology | Broker Fiduciary Rating | Jan-22

Sector Study | Brokerage & Securities | Jan-22

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.