Press Release

VIS Assigns Initial Entity Rating to Pakistan Currency Exchange Company (Private) Limtied

Karachi, November 20, 2023: VIS Credit Ratings Company Limited (VIS) has assigned initial entity ratings of ‘A-/A-2’ (Single A minus/A-Two) to Pakistan Currency Exchange Company (Private) Limited (“PCEC” or “the Company”). Medium to long term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk factors may vary with possible changes in the economy. Short term ratings of ‘A-2’ denotes good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.
Pakistan Currency Exchange Company (PCEC) is a private limited company established in June 2003, licensed by the State Bank of Pakistan (SBP) to conduct currency exchange and related services under the Foreign Exchange Regulations Act, 1947. It operates multiple branches in various Pakistani cities and is in process to consolidate its franchises and booths under its direct management.
Majority shareholding of the Company is held by Mr. Imran Ali Bostan. The Board of Directors includes three directors, Mr. Imran Ali Bostan, Maj (R) Khizar Hayat Khan, and Mr. Malik Tahir Abbas. Maj (R) Khizar Hayat Khan serves as the Chief Executive of the Company.
Assigned ratings incorporate the business risk profile of the Currency Exchange sector. The industry is characterized by high inherent exposure to fluctuations in currency exchange rates, and susceptibility to changes in regulations. While substitution risk is considered low, being the only conduit for most currency exchange transactions, operational risk in terms of AML/KYC remains heightened. However, regulatory guidelines and framework, while constraining, effectively serve to mitigate a significant portion of these operational risks. Ratings incorporate PCEC’s strong market presence, well-structured internal monitoring systems, and risk mitigation strategies.
Ratings consider the steady growth in foreign exchange income over time, although margins have remained volatile. Profit margins are impacted by fluctuating volumes and regulatory constraints on profit margins, with SBP limiting the spread. While net profitability was supported by improved operational efficiency and higher other income, it remained partly constrained due to increased financial burden attributed to higher debt utilization for working capital requirements. Ratings will remain sensitive to PCEC’s ability to sustain profitability by expanding transaction volumes and improving efficiency. Improvement in capitalization indicators is also critical, as FY23 saw an uptick in short-term debt, leading to higher gearing and leverage ratios. Going forward, improving capitalization metrics and maintaining sound liquidity and coverage factors will remain important for assigned ratings.
For further information on this ratings announcement, please contact Mr. Saeb Muhammad Jafri (Ext: 202) or the undersigned (Ext: 207) at 021-35311861-64 or email at info@vis.com.pk.



Sara Ahmed
Director

Applicable Rating Criteria:
Currency Exchange Companies (October 2023)
https://docs.vis.com.pk/docs/ExchangeCompanyRatingMethodologyV2-2023.pdf
VIS Issue/Issuer Rating Scale:
https://docs.vis.com.pk/docs/VISRatingScales.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 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .