Press Release

VIS Places Entity Ratings of LSE Financial Services Limited on ‘Rating Watch-Developing’

Karachi, February 14, 2023: VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of LSE Financial Services Limited (LSEFSL) at ‘A/A-1’ (Single A/A-One) with ‘Rating Watch-Developing’ status. The medium to long-term rating of ‘A’ denotes good credit quality with adequate protection factors. Moreover, the risk factors may vary with possible changes in economy. The short-term rating of ‘A-1’ denotes high certainty of timely payment coupled with excellent liquidity factors and supported by good fundamentals protection factors. The previous rating action was announced on December 21, 2021.

LSEFSL was created after ceasing its stock exchange operations on January 11, 2016, subsequent to notification by Securities and Exchange Commission of Pakistan (SECP), directing integration of the stock exchanges in Pakistan. Consequently, the Company was granted a license to operate as investment finance services company as a Non-Banking Financial Company (NBFC) by the SECP under the name of “LSE Financial Services Limited”. Assigned ratings incorporate Company’s low business risk appetite given its structured and diversified unique business model. Core earnings of the company comprises of revenue generation from various avenues including income from investment in Margin Trading System (MTS), rental income, income from room maintenance and from financial assets. Around 40% of the asset base comprises of investment in associates, income from the same has provided considerable support to the bottom line on a timeline basis. Ratings also derive comfort from conservative capital structure in absence of commercial borrowings and adequate liquidity. However, the Company remains non-compliant with NBFC regulation to invest at least 70% of total assets in financing activities.

The ‘Rating Watch-Developing’ status reflects the recent announcement of the proposed Scheme of Compromises, Arrangement and Reconstruction of LSEFSL with and into newly incorporated companies LSE Ventures Limited (LVL) and LSE Proptech Limited (LPL). LVL’s principal business include making strategic & long-term investments and equity injection in other companies, while LPL aims to provide digital platform for real estate management. Upon completion of the proposed demerger, all real estate assets held by LSEFSL shall be transferred to LPL and all strategic investments into LVL. Post demerger, LSEFSL capital base shall reduce significantly, limiting business operations and impacting overall competitive position of the Company. Consequently, revenue stream and diversity are expected to decline with income generation primarily from MTS investments. Going forward, ratings remain sensitive to approval and completion of the proposed Scheme of Compromises, Arrangement and Reconstruction of LSEFSL, the outcome of which may impact ratings.

For further information on this rating announcement, please contact Syeda Batool Zehra Zaidi (Ext: 210) or the undersigned (Ext: 207) at 021-35311861-70.

Sara Ahmed

Applicable rating criteria: Non-Bank Financial Companies (Mar 2020)

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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited