Karachi, November 22, 2021 (PPI-OT):VIS Credit Rating Company Ltd. (VIS) has maintained the entity ratings of AKD Securities Limited (AKDSL) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings has been placed on ‘Rating Watch-Positive’. Long Term Rating of ‘A+’ reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and risk factors are minor. The previous rating action was announced on November 30, 2020.
Revision in rating outlook takes into account the proposed merger with BIPL Securities Limited (BIPLS) whereby AKDSL will be merged with and into BIPLS for issuance of ordinary share of BIPLS to the shareholders of AKDSL on the basis of a swap ratio of 2.59 shares. The proposed merger is expected to impact positively resulting in a larger market share, expanded branch network and larger equity base allowing for greater opportunities for growth. The Scheme of Arrangement is under approvals and ratings will be reviewed on finalization of the same.
The assigned ratings continue to factor in AKDSL’s long-standing experience in equity brokerage business, strong sponsor profile, sizeable retail clientele and adequate capitalization and liquidity indicators. The ratings also take into account the high business risk profile of the brokerage industry, given the volatility in trading volumes. Historically, owing to this volatility in volumes, brokerage industry players have experienced swings in profitability.
AKDSL recorded strong growth in brokerage income during FY21, partly on account of an increase in market share, albeit driven by higher equity market volumes along with implementation of minimum commission rule by PSX. The same was in line with industry trends. In FY21, the company also booked sizeable capital gains boosting overall profitability. Ratings also factor in notable improvement in AKDSL’s efficiency ratio. The revenue base depicts increased diversification, with higher contributions from consultancy income and investment return on financial assets.
Going forward, management will continue to focus on growing its retail clientele, which remains a core pillar of its strategy. On corporate advisory and underwriting front, management expects revenues from the segment to depict healthy growth in the ongoing year given present mandates in the pipeline and expected materialization of ongoing projects. The assigned ratings remain dependent on maintenance of profitability, liquidity and capitalization ratios, in line with threshold for the assigned rating.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/