PACRA Updates Entity Ratings of Alfalah Securities (Pvt.) Limited; Assigns Rating Watch

Alfalah Securities (Private) Limited (“ASPL” or “the Company”), a wholly-owned subsidiary of Bank Alfalah Limited, operates as a mid-sized brokerage firm in Pakistan, providing a broad range of services encompassing Equity Brokerage, Online Trading, Commodity Trading, Research, Investment Banking, Forex, Money Market, and Advisory Services. The Company benefits from the financial backing of its parent, a leading commercial bank, which partially mitigates liquidity and funding risks. During CY24, Pakistan’s brokerage sector expanded, supported by an ~84% increase in the KSE-100 Index, amid improving macroeconomic indicators. ASPL achieved a commendable 50% year-over-year revenue expansion to PKR 721.5 million in CY24. This performance represents a material improvement from the previous fiscal year, transitioning from a net loss position of PKR 197.5 million in CY23 to a net profit of PKR 12.1 million. While these results indicate positive operational momentum, the organization continues to face margin compression due to escalating operational expenditures. Specifically, service expenses grew by 13.9% while administrative costs surged 44.9%, creating significant earnings headwinds that partially offset revenue gains. The Company’s equity position improved to ~PKR 493.4 million following a capital injection of PKR 1.2 billion from Bank Alfalah, reversing the prior year's negative equity of ~PKR 711.1 million. Ownership concentration increased as Bank Alfalah’s stake rose to 95.59%, while CLSA’s holding diluted to 2.93%. In parallel, Optimus Capital Management has entered into a Share Purchase Agreement to acquire Bank Alfalah’s stake, with regulatory clearance obtained from the Competition Commission of Pakistan (CCP) and final approval pending from ASPL’s board. The updated ratings of ASPL’s reflects elevated operational risk, stemming from sustained financial losses and recent management turnover, including the resignation of the former CEO following significant provisioning events, as publicly reported. The placement of the ratings on Rating Watch captures ongoing developments related to the pending change in ownership, governance enhancements, and the Company’s ability to restore sustainable profitability.
Going forward, enhancing the rating perspective hinges on improving core income, retaining market share, and diversifying revenue in brokerage. Upholding sound internal controls, retaining key personnel, and diligent risk monitoring are also vital.

About the Entity
Alfalah Securities (Pvt.) Limited (Formerly: Alfalah CLSA Securities (Pvt.) Limited) holds a Trading Right Entitlement Certificate (TREC) for the Pakistan Stock Exchange (PSX) and has operated as a private limited company since its establishment. Registered with the Securities and Exchange Commission of Pakistan (SECP) under the Securities Brokers Regulations, 2016, ASPL functions as a subsidiary of Bank Alfalah Limited, one of Pakistan's premier commercial banking institutions, which maintains a 95.59% majority ownership. The company's governance structure features a six-member board of directors, including the Chief Executive Officer, Mr. Masood Ebrahim.