Press Release

VIS Reaffirms Entity Ratings to Darson Securities Limited

Karachi, December 30, 2022: VIS Credit Rating Company Limited has reaffirmed entity ratings of Darson Securities Limited at ‘BBB+/A-2’ (Triple B Plus /A-Two). The long-term rating of ‘BBB+’ signifies adequate credit quality with reasonable and sufficient protection factors. Risk factors are considered variable if changes occur in the economy. Short term rating of ‘A-2’ denotes good certainty of timely payments coupled with sound liquidity and company fundamentals. Outlook on the assigned ratings is ‘Stable’. Previous ratings were announced on December 01, 2021.

Darson Securities Limited (DSL) was incorporated in 1998 possessing a historical track record of providing brokerage services to predominantly a domestic retail clientele through 10 branches across Pakistan with corporate office situated in Karachi. Rating incorporates a small improvement in market positioning amid diminishing industry volumes. Shareholding of the company is primarily vested within the Dar family. During the review period, quantum of retail clientele of the company increased, as a result of which client concentration has improved.

The assigned rating takes into account manageable financial risk profile of the Company. Overall settlement risk is moderately low given satisfactory liquidity coverages and capitalization levels. Exposure to market risk is limited in terms of quantum of proprietary operations in comparison to peers, albeit investment thresholds warrant a review. Ratings factor in conservative capitalization profile supported by lack of debt on the balance sheet and gearing has historically remained at negligible levels. Going forward, the growth in equity in tandem with business volumes, is considered important from ratings purview. Furthermore, given plans to grow business volumes post market stabilization and low level of internal capital generation capacity, external support from sponsors may be warranted over the medium-term horizon.

Ratings are constrained by lack of diversification in operating revenues, which are predominantly composed of brokerage commissions. However, going forward, efforts to improve revenue diversification are on the anvil, with DSL recently acquiring an ‘Offer to Consultant’ license and developing a separate Corporate & Investment Banking function. Overall Corporate Governance profile of the entity is considered adequate, given that DSL is a public unlisted company. Nevertheless, there are several areas that could be improved upon to align with Corporate Governance best practices.

For further information on this rating announcement, please contact the undersigned (Ext: 207) or Ms. Asfia Aziz (Ext: 212) at 021-35311861-71 or fax to 021-35311872-3.

Sara Ahmed

Applicable rating criteria: Methodology – Securities Firms Rating (July 2020)

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