Press Release

VIS Maintains Entity Ratings of Foundation Securities (Private) Limited

Karachi, April 22, 2020: VIS Credit Rating Company Ltd. (VIS) has maintained the entity ratings of Foundation Securities (Private) Limited (FSL) at ‘A-/A-2’ (Single A Minus/A-Two). Outlook on the assigned ratings has been revised from ‘Negative’ to ‘Stable’. The previous rating action was announced on April 1, 2019.

The revision in outlook takes into account overall improvement in trading volumes in the ongoing fiscal year. FSL has benefited from the improvement in trading volumes, posting an annualized RoAE of 22.5% in 1H’FY20 vis-à-vis losses in the preceding couple of years. So far, the brokerage industry has not been affected by the outbreak of the novel coronavirus, with trading volumes in 9M’FY20 already exceeding full year volume for FY19. Furthermore, the standardization in range/scale of brokerage commissions is expected to positively impact the revenue stream of brokers and translate in an improvement in industry-wide quality standards.

FSL continues to maintain a low business risk strategy with no proprietary book (limited exposure to market risk), low exposure to settlement risk and cap on underwriting exposure in relation to equity. With majority (52%) of the asset base invested in liquid assets, liquidity profile of the company is considered sound. However, given improvement in trading volumes in 1H’FY20, quantum of client deposits and short term financing has increased, thereby resulting in an increase in gearing and leveraging, which are on the higher side.

The rating assigned to FSL takes into account implicit support from majority shareholder, Fauji Foundation Pakistan. Rating constraints for FSL include significant reliance on equity brokerage segment, and low capitalization buffers. Accordingly, the assigned rating remains dependent on maintaining leveraging & gearing, in line with FSL’s long term trend.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.



Faryal Ahmad Faheem
Deputy CEO

Applicable rating criteria: Methodology – Securities Firms Rating (June 2017)
http://vis.com.pk/kc-meth.aspx

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 April 23, 2020 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.