Karachi: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of Intermarket Securities Limited (IMS) at ‘A-/A-2’, indicating stable credit quality with a developing outlook due to a forthcoming merger with EFG Hermes Pakistan Limited.
According to VIS Credit Rating Company Limited, the long-term rating of ‘A-‘ reflects IMS’s good credit quality with adequate protection factors, although economic changes could influence risk factors. The short-term rating of ‘A-2’ suggests a strong likelihood of timely repayment of obligations, supported by solid liquidity. The ratings are under a ‘Rating Watch – Developing’ status due to the anticipated merger, which places IMS in a critical phase of business restructuring. Previously, the ratings were updated in February 2023.
IMS operates primarily in equity brokerage, serving a diverse client base including retail, high net worth individuals, and institutional clients, both local and international. The firm is well-established, holding a Trading Rights Entitlement Certificate from the Pakistan Stock Exchange and is monitored by top-tier auditors. The impending merger with EFG Hermes, an entity noted for its brokerage operations since 1999, proposes a swap ratio of 2.16:1, currently pending approval from relevant regulatory and judicial bodies. This merger is expected to enhance IMS’s market position by increasing its client base and market share.
The financial assessment reflects a positive trajectory with higher earnings reported in the first nine months of FY24, primarily from an increase in brokerage activities and growth in margin financing and dividends. However, brokerage still dominates the revenue stream. Operational efficiencies have shown improvements, though costs remain a concern. The liquidity profile is deemed satisfactory, but the company faces elevated market risk due to its short-term investments. Despite a rise in gearing and leverage, these indicators are considered to be within acceptable limits. Future ratings will depend on how well IMS diversifies its revenue streams and manages liquidity and market risks post-merger.