Press Release

VIS Reaffirms Entity Ratings & Assigns Rating to Proposed Commercial Paper of Next Capital Limited

Karachi, March 10, 2021: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Next Capital Limited (NCL) at ‘A-/A-2’ (Single A-Minus/A-Two). VIS has also assigned preliminary rating of ‘A-2’ (A-Two) to Next Capital Limited’s (NCL) proposed Commercial Paper (CP) issue of up to Rs. 200 million. The CP will have a tenor of 9 months while proceeds would be utilized for working capital requirements of the brokerage business. It is proposed to have a bullet repayment at maturity and expected to be retired largely through internal liquidity management along with the future funding arrangements, if needed. The rating takes note of the lower risk in the settlement position of brokerage industry which provides cushion for liquidity management. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on June 15, 2020.

Assigned ratings incorporate established and sustained market position of NCL in equity brokerage business and corporate advisory services. Ratings also factor in the company’s diversified revenue mix which provides sustainability to earnings and support to the overall business risk profile. Assessment of financial profile incorporates low leveraged capital structure, adequate liquidity buffers and improvement in profitability profile during FY20 as well as in the ongoing fiscal year. The growth in revenue is attributable to sizeable jump in brokerage income alongside support from other income earned. Recurring brokerage income largely emanates from retail side with increase in share turnover for clients and commission earned per share. On the corporate advisory front, NCL has adequate signed mandates in hand.

Post two consecutive years of declining trends, PSX volumes have showcased an increase of around ~25% in FY20 largely driven by high index volatility experienced during the period (given the impact of covid-19 and subsequent economic recovery). The growth momentum continues in the ongoing fiscal year with overall volumes clocking in at ~74b in 1HFY21. The uptick in market volumes has supported the profitability profile of stock brokers. Going forward, positive investor sentiment resulting from improving macroeconomic indicators is expected to further improve the overall market participation over the medium term.

For further information on this rating announcement, please contact Mr. Muhammad Tabish (Ext: 204) or the undersigned (Ext. 306) at 021-35311861-70 or email at info@vis.com.pk


Faryal Ahmad Faheem
Deputy CEO


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

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