Press Release

VIS Reaffirms Broker Fiduciary Rating of Next Capital Limited

Karachi, October 31, 2024: VIS Credit Rating Company Ltd. (VIS) has Reaffirmed the Broker Fiduciary Rating of Next Capital Limited at ‘BFR2’. Outlook on the assigned rating is ‘Stable’. Rating of BFR2 denotes strong fiduciary standards. Last rating action was announced on September 14, 2023.

The rating signifies strong ownership and governance, sound management and client services as well as internal control and regulatory framework. Business and financial sustainability is considered adequate.

Next Capital Limited (‘NCL’ or ‘the Company’) was incorporated in December, 2009. NCL caters primarily to equity broking services to domestic retail and high net worth (HNWI) clients, local institutions, and foreign broker dealers. Alongside, the company has a reputable presence in investment banking & corporate financial advisory business in Pakistan. NCL, besides a head office based in Karachi, runs its retail operations through a branch in Lahore. The Company holds a Trading Right Entitlement Certificate (TREC) issued by the Pakistan Stock Exchange Limited (PSX) for Trading and Self-Clearing Services. External auditors of the company are Baker Tilly Mehmood Idrees Qamar – Chartered Accountants and belong to category ‘A’ on the approved list of auditors published by the State Bank of Pakistan (SBP).

Assigned rating takes into account the strong ownership and governance framework of the Company, with the Company being a listed company and board of directors comprising seven members, inclusive of two independent directors. Additionally, the Company has four board committees namely audit, human resource and remuneration, risk management and investment committees, with three of four committees headed by an independent director. Nevertheless, repetition of the members is observed across the board. Management & client services of the Company are considered sound. However, customer grievance mechanism may be improved through greater visibility together with enabling the submission of complaints through SMS text. Assigned rating also incorporates internal control and regulatory compliance of the Company, with internal policies in place. However, enhancing the scope of internal policies, including conflict of interest policy, may be considered. Similarly, assignment of tighter credit limits to institutional clients and high net worth individuals may improve operational risk management of the Company. Additionally, increasing the frequency of trade review procedures along with daily reporting of personal trade details to compliance officer as well as establishing an independent risk department may further improve the Company’s internal control framework.

Assessment of the financial profile reflects pressure on the profitability profile of the Company. During FY24, the Company recorded higher operating revenues, mainly driven by an uptick in brokerage revenue together with growth in income from advisory and consultancy segment. Nevertheless, brokerage revenues continued to dominate the revenue mix. Elevated cost-to-income ratio remains a drag on the operating profitability of the Company, with operating losses reported in FY24. Liquidity profile of the Company is considered adequate. Market risk of the Company is considered low as the Company reduced its proprietary investments during FY24. Equity base of the Company is small relative to its peers, while gearing and leverage indicators remain at manageable levels. Going forward, improvement in the financial profile of the Company, marked by enhancement in the revenue base, along with managing operational efficiencies and liquidity profile will remain imperative for the rating.

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







Applicable Rating Criteria: Broker Fiduciary Ratings:
https://docs.vis.com.pk/Methodologies%202024/Broker-Fiduciary-Rating.pdf
VIS 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 .