Karachi, November 30, 2020 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has upgraded the entity ratings of AKD Securities Limited (AKDSL) from ‘A/A-2’ (Single A/A-Two) to ‘A+/A-1’ (Single A Plus/A-One). Outlook on the assigned ratings is ‘Stable’. 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 September 27, 2019.
The revision in rating takes into account improvement in AKDSL’s market share, strong growth in topline and notable improvement in efficiency ratio. The revenue base also depicts increased diversification, with higher contributions from consultancy income and investment return on financial assets. The +60% growth noted in brokerage income was partly on account of an increase in market share, albeit was mainly driven by the higher equity market volumes, noted in FY20, and was in line with the industry.
The assigned ratings continue to factor in AKDSL’s long-standing experience in equity brokerage business, strong sponsor profile, sizeable retail clientele and adequate leverage and liquidity indicators. The ratings incorporate cyclical nature of the brokerage industry, which depicts sensitivity to changing market volumes; and the company’s market positioning in the industry, given a market share of more than 11%.
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.
Lately, the company has disclosed its intention to acquire BIPL Securities, wherein the company has qualified as the highest bidder. Ratings of the AKDSL will be revisited, as and when the transaction materializes. 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
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