Karachi, Pakistan Currency Exchange Company (Private) Limited (PCEC) has received its initial entity ratings from VIS Credit Rating Company Limited (VIS), reflecting its sound financial standing and stable business prospects in the currency exchange sector.
According to VIS Credit Rating Company Limited, PCEC's medium to long-term rating has been assigned as 'A-', indicating good credit quality with adequate protection factors, although these may vary with economic changes. The short-term rating of 'A-2' denotes a strong likelihood of timely payment, underpinned by solid liquidity factors and company fundamentals, along with good access to capital markets. The outlook on these ratings is considered 'Stable'.
Established in June 2003 and licensed by the State Bank of Pakistan (SBP) to conduct currency exchange and related services, PCEC operates multiple branches across various Pakistani cities. The company is in the process of consolidating its franchises and booths under direct management. The majority shareholding is held by Mr. Imran Ali Bostan, with the Board of Directors comprising Mr. Bostan, Maj (R) Khizar Hayat Khan, and Mr. Malik Tahir Abbas. Maj (R) Khizar Hayat Khan serves as the Chief Executive of the Company.
The ratings by VIS take into account the inherent business risks in the Currency Exchange sector, including high exposure to fluctuations in currency exchange rates and susceptibility to regulatory changes. While operational risks, particularly in terms of Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance, remain heightened, regulatory guidelines and frameworks are noted to effectively mitigate a significant portion of these risks. VIS acknowledges PCEC's strong market presence, well-structured internal monitoring systems, and risk mitigation strategies.
Despite steady growth in foreign exchange income, profit margins have been volatile due to fluctuating volumes and regulatory constraints imposed by the SBP on profit margins. While net profitability benefited from improved operational efficiency and higher other income, it was partly offset by increased financial burdens from higher debt utilization for working capital needs. The company's ability to sustain profitability, expand transaction volumes, and improve efficiency will be crucial for future ratings. In FY23, an increase in short-term debt led to higher gearing and leverage ratios, making the improvement in capitalization indicators critical. Maintaining sound liquidity and coverage factors will also be important for the company's continued favorable rating.