The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Maintains Broker Management Rating of Ismail Iqbal Securities (Pvt.) Ltd

Rating Type Broker Management
(26-Aug-22 )
(27-Aug-21 )
Action Maintain Maintain
Long Term BMR3 BMR3
Short Term - -
Outlook Stable Stable
Rating Watch - -

Ismail Iqbal Securities (Pvt.) Limited (“IISPL” or the “Company”) is primarily engaged in the provision of equity brokerage services with a modest market share. The Company has a lean organizational structure where all the departmental heads report to the CEO. The rating takes note of the experienced and qualified management team and adequate internal control framework. The CFO is also looking after the compliance department which could be made independent to improve its functionality. Formation of an independent risk management department and internal audit department is encouraged. The depth and scope of internal control policies could be enhanced further. The rating accounts for the sound client services including online trading, mobile-app, real-time transaction alerts, complaint resolution process, and access to research reports. The rating takes comfort from the sound financial profile of the main sponsor. The governance framework has room for improvement with the inclusion of qualified and independent directors. Increasing the board size may also result in creation of independent committees at the board level. The Company has a competitive clientele; however, limitations exist in terms of revenue diversification. Following the market trend, the trading volumes of IISPL also took a hit, consequently, the commission on equity brokerage fell to ~PKR 93mln for FY22 (FY21: PKR ~160mln). However, the Company managed to sustain its market share. The bottom-line resulted in a loss of ~PKR 70mln for FY22 mainly due to losses suffered on prop-book trading. The equity stood at ~PKR 252mln at end-Jun’22 reflecting a decline of ~22% when compared with FY21. The assigned rating is supported by a low leveraged capital structure.
The management's ability to retain its market share and enhance the volumes and diversity of revenue to improve its competitive position in the brokerage industry remains crucial for the sustainability of the assigned ratings. Maintaining a strong financial profile and retention of key human resources remains important.

About the Entity
Ismail Iqbal Securities (Pvt.) Limited was established in August 06, 2004. The Company operates through two branches, both in Karachi. The Company is owned by three individuals, wherein the majority shareholding (65%) lies with the CEO - Mr. Ahfaz Mustafa. The Company’s board of directors comprises two experienced individuals including the CEO - Mr. Ahfaz Mustafa. The other director, Mr. Muhammad Taufique is a non-executive director and provides governance oversight. The Company has appointed M/s Baker Tilly Mehmood Idrees Qamar – Chartered Accountants as the external auditors.

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.