Karachi, March 7, 2017: JCR-VIS Credit Rating Company Ltd. (JCR-VIS) has reaffirmed entity ratings of Concordia Securities Limited (CSL) at ‘BB+/A-3’ (Double B Plus/A-Three). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on December 1, 2015.
Current ratings reflect CSL’s sponsor profile with more than 90% of shareholding held with Westbury Group of Companies (WGC), a conglomerate having presence in the financial and industrial sectors. CSL’s ratings also take into account its low revenue stream and limited underwriting capacity. During 2016, the company injected equity amounting Rs. 93.5m with paid-up capital of the company increasing to Rs. 120.0m, at end-June 2016. Growth in equity coupled with reduction in payables reported lower leverage indicators.
Historically, over three-fifths of brokerage income emanated from institutions. However with subdued trading activity by institutions, revenue base of the company declined. Subsequently, income from retail and HNWIs represented more than two-thirds of brokerage income. With greater trading volumes from retail clients vis-à-vis institutions, customer granularity improved significantly with 85 clients accounting for 66% of brokerage revenue for the period ending June 30, 2016. With lower revenue base and higher expenses, bottom line of the company declined significantly. Given higher dependency on related parties and institutions for revenue generation, the company may need to grow its core operations for a stable earnings stream, going forward. Moreover, managerial responsibility is vested primarily with the CEO indicating significant key person risk.
For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Javed Callea (Ext: 201) at (021)35311861-71 or fax to (021)35311872-3.
Jamal Abbas Zaidi
Applicable Rating Criteria: Methodology - Securities Firms Rating (May 2015) http://www.jcrvis.com.pk/Images/Securities%20methodology%201%20-2015.pdf
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