The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Maintains Broker Management Rating of Aba Ali Habib Securities (Pvt.) Limited

Rating Type Broker Management
(15-Mar-23 )
(15-Mar-22 )
Action Maintain Initial
Long Term BMR2 BMR2
Short Term - -
Outlook Stable Stable
Rating Watch - -

Aba Ali Habib Securities (Pvt.) Limited (“AAH”) is one of the oldest brokerage houses, established in 1970. AAH is primarily engaged in the provision of equity brokerage services while diversity exist in the form of commodity brokerage, MTS, MFS and IPO distribution. The rating signifies a strong internal control environment supported by outsourced internal audit, dedicated compliance department and the presence of audit and risk management committees. However, the extent of policies may be enhanced further with the addition of more detailed guidelines. The availability of online trading, mobile-app, complaint system and research department results in a sound client servicing. AAH has a lean organizational structure with all the required departments in place, the management is experienced; however, depth needs to be built. The assigned rating takes into account a sound business acumen of the sponsor family. The governance framework may be enhanced further with the induction of certified independent directors. AAH actively manages its investment book whereby the funds are strategically moved between equity and fixed income avenues based on market expectations. The ongoing volatility of equity market may impact the commission revenue going forward. Financial assessment indicates a decline of commission on equity brokerage by ~35% during 1HFY23 as compared to 1HFY22. AAH earned revenue from equity brokerage of ~PKR 34mln in the 1HFY23 (1HFY22: ~PKR 52mln) whereas for FY22 it stood at ~PKR 51mln (FY21: ~PKR 101mln). However, the mark-up earned on MTS/MFS has provided support. The Company has a strong equity base of ~PKR 1,024mln at end-Dec’22 (Jun’22: ~PKR 968mln) which provides a cushion against unexpected shocks. The rating takes comfort from a low leveraged capital structure. In the near future, once clarity emerges on the economic and political front, the management has plans to enhance the institutional clientele and to venture into the IPO advisory and underwriting business. The management also intends to improve the technological structure for swift on-boarding of retail clientele. Moreover, geographical diversification is also under consideration to improve client outreach.
Going forward, improvement in core income, sustainability of market share and profitability and materialization of planned business strategies remains critical. Meanwhile, upholding strong internal controls, sound governance structure, retention of key management personnel and diligent monitoring of risks is important.

About the Entity
Aba Ali Habib Securities (Pvt.) Limited is a TREC holder of Pakistan Stock Exchange and a Member of Pakistan Mercantile Exchange Limited. While AAH has been operating since 1970, it was incorporated in 1996 as a Private Limited Company. AAH is registered with the SECP under Securities Brokers Regulations 2016. AAH is primarily owned by Mr. Aba Ali Habib who has been associated with the Capital Markets for over forty years, and has diversified experience in the field of Equity Brokerage. AAH’s Board comprises of six members including the CEO whereas four non-executive directors are also present. The CEO, Mr. Zahid Ali Habib possesses a diversified experience in capital markets. He holds a Master’s Degree in Finance from IBA. He has played a key role in developing risk management system at PSX and has served on various PSX committees.

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.