Rating Details	Rating Type	BFR
	Dissemination Date	Current (09-Mar-23 )	Previous (31-Mar-22)
	Action	Maintain	Initial
	Rating	BFR 3+	BFR 3+
	Outlook	Stable	Stable
	Rating Watch	-	-

Rating Rationale	Factor	Comment
	Ownership	Controlling stake is held by Mr. Syed Asim Zafar, the CEO, with ~80% of the shares while the other directors hold minority shareholding.
	Governance	The Company has increased its board size to 5 members with the addition of two non-executive directors, strengthening the governance framework.
	Management and Client Services	A lean organizational structure is present with an experienced management team. Client services may be improved with the addition of a research department.
	Internal Controls and Regulatory Compliance	Separate internal audit and compliance departments exist; however, increasing the depth of the departments may improve the internal controls framework further.
	Business Sustainability	There is product and geographic concentration present in the top line of the Company. ZSPL may look towards diversification to improve its concentration risk.
	Financial Sustainability	The equity base of the Company is adequate for its scale of operations. The equity stood at ~PKR 252mln at end-Jun'22 and at ~PKR 249mln at end-Dec'22.

Key Rating Drivers

Zafar Securities (Pvt.) Limited ('ZSPL' or the 'Company') mainly provides equity brokerage services while commodities brokerage is also present. The assigned rating incorporates the business acumen of the primary sponsor. The governance framework has been improved by increasing the board size; however, the addition of independent directors may further enhance governance oversight. ZSPL offers online trading and a mobile app to its customers to facilitate the execution of their transactions. ZSPL managed to contain the decline in traded volumes compared to the market. The brokerage revenue of ZSPL declined by ~25% in FY22 when compared with FY21 despite market volumes declining by ~45% during the same period. The Company is exposed to market risk resulting from proprietary trading and unrealized losses on prop-book amounted to ~PKR 22mln during FY22. Due to losses on the prop book, ZSPL incurred a loss after tax of ~PKR 21mln during FY22. ZSPL has a low-leveraged capital structure with an adequate equity base at end-Dec'22. 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 the proprietary investment book is critical.

About the Entity
	Legal Structure	Private Limited
	Year of Establishment	28-Jun-99
	Type of License	Trading and Self-clearing
	Majority Ownership	Mr. Syed Asim Zafar | ~80%

Regulatory Disclosures	Analyst	Applicable Criteria	Related Research
	Afnan Iqbal afnan.iqbal@pacra.com +92-42-35869504 www.pacra.com	Methodology | Broker Fiduciary Rating | Jan-22	Sector Study | Brokerage & Securities | Jan-23

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