Press Release

VIS Reaffirms Entity ratings of Arif Habib Limited

Karachi, July 26, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Arif Habib Limited (AHL) at ‘AA-/A-1’ (Double A Minus/A-One). Long term rating of ‘AA-’ signifies high credit quality, and strong protection factors. Risk is moderate but may vary slightly from time to time because of economic conditions. Short term rating of A-1 denotes high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on April 13, 2020.

The assigned ratings are underpinned by strong sponsors’ profile, with majority shareholding vested with Arif Habib Corporation Limited, the holding company. The sponsor owns significant interests in fertilizers, securities & commodities brokerage, corporate advisory, asset management, cement and steel sectors. Ratings also incorporate strong market position, diversified revenue streams, strong financial risk profile and adequate corporate governance framework. Ratings are constrained by the cyclicality historically noted in the brokerage industry revenues. Moreover, high exposure to market risk, in terms of large proprietary book compare to equity and investments in risky avenues are added rating constraints.

During the period under review, the Company has done well in regaining market share, specifically in 9M’FY21, as a result of which brokerage revenues in 9M’FY21 doubled vis-à-vis SPLY. Advisory & consultancy revenues also posted a 4-fold uptick, as IPOs picked pace in the market, and AHL was the lead underwriter in 3 out of 6 IPOs in FY21. In addition, the Company was Financial Advisor & Arranger to 6 debt transactions and 3 secondary offerings. Overall profitability of the company started to rebound in FY20 after posting a net loss in FY19. Profitability indicators have depicted notable improvement in 9M’FY21 and compare favorably to peers. Total financing taken by the company has notably declined, as a result of which we have noted significant drop in gearing & leverage.

The Company’s brokerage business is supported by its notable reliance on domestic retail investors, commission contribution from whom has increased notably over the past couple of years, in tandem with the uptick in domestic retail accountholders. Increase in reliance towards retail investors is viewed positively, as retail investors are generally more granular & sticky than institutional investors.

AHL remains one of the prominent players in both, equity and corporate advisory domain with a market share of ~11.8% (based on ready and future value) in equity trading during 9M’FY21. Liquidity profile draws support from adequate liquid assets in relation to total liabilities. Going forward, maintaining sound financial profile, efficiency, market share and adherence to compliance with stipulated limits is important from a rating perspective.

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 217) or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk .



Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Securities Firms Rating (July 2020)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/SecuritiesFirm202007.pdf

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .