PACRA Maintains Broker Management Rating Of Arif Habib Limited

Arif Habib Limited ('AHL’ or the 'Company') primarily provides equity brokerage and advisory services. FY23 experienced low market volumes and limited investor interest, impacting the brokerage industry's revenue; however, since the start of FY24, the market volumes have picked up and investor interest has managed to push the index to historic highs. Market volumes growth trend appears to be ongoing, resulting in positive market indicators for FY24. The rating incorporates the Company’s association with astute sponsors, ‘Arif Habib Group’. AHL has a robust governance framework backed by a board of 7 members including 4 non-executive and two independent directors. The management team comprises seasoned professionals with proper departmentalization and defined roles. AHL has an in-house internal audit department which directly reports to the Audit Committee. Internal audits are also performed at the group level which further ensures rigorous internal controls. Moreover, separate departments are in place to oversee the risk management and compliance function. AHL has developed and implemented comprehensive guidelines and policies across the Company. The Company has established rigorous protocols regarding risk assessment by implementing KYC, CDD, AML and CFT. During FY23, the equity brokerage revenue stood at ~PKR 471mln depicting a decline of ~9% (SPLY: ~PKR 517mln). Despite the subdued market conditions in FY23, AHL managed to achieve a profit of ~PKR 181 million during the period. Whereas, in 1QFY24 the brokerage revenue was reported at ~PKR 143mln, (SPLY: ~PKR106mln). However, the Company managed to outperform the market during 1QFY24 by growing its topline by ~35% as compared with market volume growth of ~31%, resulting in improved market share of the Company. As a result, AHL reported a profit after tax of ~PKR 151mln during 1QFY24. The Company consistently introduces innovative products and services for its customers, thereby sustaining and enhancing its market share over the years. The Company has a strong equity base of ~PKR 5,145mln at end-Sep'23.
Moving forward, it is imperative from a ratings perspective to maintain topline growth, revenue diversification, and profitability. Moreover, retention of key management personnel and further separation of management roles remain critical.

About the Entity
Arif Habib Limited is a financial services company, a subsidiary of Arif Habib Corporation, listed on the Pakistan Stock Exchange. The company is engaged in equity trading, equity research, money market, forex, and commodities trading and has a very strong brand name. AHL also provides investment banking & advisory services to a large scale of clientele. AHL operates from multiple branches across Pakistan, including the Head office based in Karachi, Pakistan. AHCL holds ~73%, and General Public hold ~27%. The free float of AHL is ~30%. AHCL is the holding company of Arif Habib group.