The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Assigns Initial Broker Management Rating to Trust Securities & Brokerage Limited

Rating Type Broker Management
(20-Sep-22 )
Action Initial
Long Term BMR2+
Short Term -
Outlook Stable
Rating Watch -

Trust Securities and Brokerage Limited (“TSBL” or the “Company”) is primarily engaged in the provision of equity brokerage services to domestic retail clients. The rating incorporates the Company's strong governance framework, seasoned management team, and adequate ownership structure. The presence of independent directors strengthens the overall governance framework, resulting in the formation of independently represented board committees. The Company has a well-developed organizational structure with clear reporting lines for respective heads. The control environment is considered sound, reflected by the implementation of relevant internal control policies; however, the depth and scope of internal policies may be enhanced to further strengthen the framework. The compliance and risk management departments operate independently of each other while an outsourced internal audit department provides comfort. Appointment of category ‘A’ auditors may be considered to improve the external control framework. The clients have been provided with the facility of online trading, mobile app, and macroeconomic research. The formation of a proper research department may further enhance the client experience. Assessment of earning profile indicates swift escalation parallel with the improvement in traded volumes in FY21 and subsequent decline in FY22. The Company earned a revenue of ~PKR 157mln during 9MFY22 (SPLY: ~PKR 221mln). The Company has an equity base of ~PKR 289mln at end-Mar’22 which may be enhanced further for financial sustainability. A low leveraged capital structure provides support to the rating.
Going forward, sustainability and enhancement in market share, improvement in profitability through augmentation and diversification of revenues, cost control, and improvement in equity will remain important for ratings. Retention of key management personnel, improvement in customer service tools, and maintaining strong controls will remain vital.

About the Entity
Trust Securities & Brokerage Limited is a TREC holder of Pakistan Stock Exchange and a member of Pakistan Mercantile Exchange Limited. The Company has been operating since 1993; however, the current owners took over in 2017. The Company is primarily owned by Mr. Junaid Shehzad Ahmed, who has a diversified business portfolio both in Pakistan and abroad. The Company's board comprises of seven members - two independent, three non-executive and two executive. The CEO, Mr. Abdul Basit, has been associated with TSBL for the last twenty seven years and holds command over diverse areas such as corporate, business and company laws, and SECP and NCCPL rules and regulations.

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.