The Pakistan Credit Rating Agency Limited
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Afnan Iqbal

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PACRA Assigns Initial Broker Management Rating to Aba Ali Habib Securities (Pvt.) Limited

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

Aba Ali Habib Securities (Pvt.) Limited (“AAH” or “The Company”) is one of the oldest brokerage houses, established in 1970. The Company is primarily engaged in the provision of equity brokerage services while diversity exist in the form of commodity brokerage, MTS, MFS and IPO distribution. In the near future, the management has planned 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. Financial assessment indicates a notable improvement of ~95% in core income. The boost came on the back of new investors on-boarding and uptick in trading volumes in FY21. On the other hand, notable gains on short-term investments resulted in profit-after-tax of ~PKR 410mln for FY21 (FY20: ~PKR 3mln). The Company has a strong equity base of ~PKR 986mln at end-Jun’21 which provides a cushion against unexpected shocks. The rating takes comfort from a low leveraged capital structure. The Company actively manage its investment book whereby the funds are strategically moved between equity and fixed income avenues based on market expectations. The market has observed volatility in terms of trading volumes in the recent months which may impact the commission revenue going forward. 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. The assigned rating takes into account a sound ownership structure. The governance framework may be enhanced further with the induction of certified independent directors.
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 the Company has been operating since 1970, it was incorporated under the Companies Ordinance 1984 in 1996 as a Private Limited Company. The Company is registered with the Securities & Exchange Commission of Pakistan (SECP) under Securities Brokers (Licensing and Operations) Regulations 2016. The Company 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. The Company’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 including trading and development; companies affairs; arbitration; new product development.

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.