Press Release

VIS Reaffirms Entity Ratings of Pakistan Currency Exchange Company (Private) Limited

Karachi, November 28, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Pakistan Currency Exchange Company (Private) Limited (‘PCEC’ or ‘the Company’) at ‘A-/A2’ (Single A Minus/A Two). Medium to long term rating of 'A-' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short-term rating of 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains ‘Stable’. Previous ratings action was announced on November 20, 2023.

PCEC was incorporated in Pakistan on June 20, 2003, as a private limited company. The State Bank of Pakistan (SBP) has issued a license in favor of the Company to undertake the business of an exchange company under the Foreign Exchange Regulations Act, 1947. The Company is engaged in the business of currency exchange and associated services permitted under the license. The registered office of the Company is situated in Karachi. PCEC operates through multiple branches across various cities in Pakistan, including Karachi, Lahore, Islamabad, Quetta, and Peshawar.

Assigned ratings take into account the business risk profile of the currency exchange sector characterized by high to medium risk. The industry is characterized by exposure to currency rate fluctuations and regulatory changes, with operational risks heightened due to AML/KYC compliance. While the regulatory framework mitigates a significant portion of these risks, recent regulatory developments permitting banks to establish currency exchange subsidiaries may intensify competitive pressures. PCEC’s market position as the largest exchange company, managing a substantial portion of the country’s currency exchange volumes, provides stability.

Assigned ratings also consider the financial risk profile of the Company. Profitability was impacted by declining foreign exchange income, while cost rationalization supported operating margins. However, rising finance costs contributed to a contraction in net income and margins. Capitalization metrics showed improvement due to an enhanced equity base, despite increased short-term debt utilization for working capital needs. Liquidity remained stable, supported by a negative cash conversion cycle, although the liquid asset position declined due to advances for office purchases. Coverage indicators weakened as funds flow from operations reduced, coupled with higher finance costs.

Going forward, ratings will remain sensitive to the Company’s ability to maintain its market position amid rising competitive pressures and its capacity to mitigate exposure to currency exchange rate fluctuations effectively. Improvement in liquidity management and coverage indicators will be critical for sustaining ratings. Regulatory developments and economic conditions will also be key factors influencing ratings.

For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.




Applicable Rating Criteria:
Currency Exchange Companies
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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .