Press Release
Date: 16-Dec-22
PACRA Maintains Broker Fiduciary Rating of Arif Habib Limited

Rating Details Rating Type BFR
Dissemination Date Current (16-Dec-22 ) Previous (17-Dec-21)
Action Maintain Maintain
Rating BFR 1 BFR 1
Outlook Stable Stable
Rating Watch - -

Rating Rationale Factor Comment
Ownership The Company is primarily corporate backed where ~63% stakes lies with Arif Habib Corporation Limited. Whereas, the general public hold ~25% of the shares.
Governance Being a listed entity, the governance framework is robust, backed by a board of 7 members including 4 non-executive and two independent directors.
Management and Client Services The management team comprise of seasoned professionals with proper departmentalization and defined roles.
Internal Controls and Regulatory Compliance AHL has a strong control environment supported by in-house internal audit department reporting directly to the Audit Committee.
Business Sustainability Revenue from equity brokerage and advisory declined by ~31% YoY in FY22. The performance is commendable in the backdrop of ~45% decline in market volumes.
Financial Sustainability The credit risk is negligible as evident from the trade receivables comprising of merely ~10% of equity at end-Jun'22. Exposure to market risk has increased due to a significant addition in the propri

Key Rating Drivers The assigned rating manifests Arif Habib Limited's ('AHL' or the 'Company') association with astute sponsors Arif Habib Group, one of the prominent conglomerates in the country. Leveraging the expertise of management, AHL has secured numerous awards from renowned bodies including the CFA Society of Pakistan. AHL provides stellar services to its clients in the form of a mobile and web-based trading, access to traders, research reports and in-house customer services. An internal audit by a group internal auditor further strengthens the internal controls. Separate departments are in place to oversee the risk management and compliance function. Contrary to the performance witnessed in FY21, the outgoing FY22 remained a challenging year for local equities. However, AHL managed to contain the decline in traded volumes compared to the market. The short-term investment portfolio also took a hit however, this was partially offset by gains on the real estate investment portfolio. Short-term financing facilities are in place to cater for any shortfall in exposure margins, curtailing the liquidity risk. Going forward, the business environment is expected to remain challenging for the brokerage industry until clarity emerges on the economic front. The rating is dependent on sustainability and improvement in profitability from core income and maintaining market share. Meanwhile, upholding a strong control framework while effectively managing risks, particularly associated with proprietary investment book is critical.

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

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.