Karachi, 11 Oct 2023:Tannu Securities (Private) Limited (TSPL), a brokerage service company based in Karachi, has been assigned an initial Broker Fiduciary Rating of ‘BFR3’ by VIS Credit Rating Company Ltd. (VIS), indicative of good fiduciary standards, accompanied by a ‘Stable’ outlook. The rating acknowledges TSPL’s sufficient ownership and governance, business and financial sustainability, along with its capabilities in management, client services, internal control, and regulatory compliance, while also highlighting areas of potential enhancement in governance, client services, internal control, and financial profile.
TSPL’s ownership and governance framework played a pivotal role in the assigned rating, recognizing its status as a private limited company with a board consisting of two members, one of whom is an independent director. VIS suggests that TSPL might bolster its governance by increasing the board size and including certified members to establish additional committees for effective oversight. An enhancement in disclosure levels, possibly through the addition of a CEO statement on the financial statement, was also recommended. Furthermore, the company's management and client services were deemed adequate, albeit suggestions such as revamping the website for prompt client assistance and expanding organizational structures were presented to strengthen overall operations and client services.
The company, which has an established set of internal policies, is recommended to amplify its internal control framework by broadening the scope of policies and introducing separate policies for conflict of interest and IT. The establishment of a risk management department and a segregation of the internal audit and compliance department are suggested as potential means to fortify TSPL’s internal control framework.
The financial profile assessment revealed a decline in TSPL's earning profile, attributed to a reduction in brokerage income amidst a contraction in trading volumes. While the company’s liquid assets provide notable coverage for its liabilities and its gearing and leverage indicators are found to be sound, its small equity base and a high, albeit declining, market risk were noted. VIS highlighted that ongoing improvements in revenue augmentation, operational efficiency, reduction of market risk, maintenance of gearing and leverage, and an increase in the size of the equity will be crucial for future ratings.
TSPL, which provides brokerage services in stock shares, securities, commercial papers, and debentures, primarily operates through its head office in Karachi, with its shareholding principally vested with Mr. Muhammad Hanif. The company, holding a Trading Right Entitlement Certificate (TREC) for Trading and Self Clearing services issued by the Pakistan Stock Exchange Limited (PSX), maintains its core income from its brokerage income, resulting in a high business risk, a factor considered in the rating.