Press Release

VIS Reaffirms Broker Fiduciary Rating of Foundation Securities (Private) Limited

Karachi, October 17, 2024: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the Broker Fiduciary Rating of Foundation Securities (Private) Limited at ‘BFR3++’. Outlook on the assigned rating is Stable. Rating of BFR3++ denotes good fiduciary standards. Last rating action was announced on September 13, 2023.

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

Foundation Securities Private Limited (‘FSL’ or ‘the Company’), a subsidiary of Askari Bank Limited, offers equity brokerage services, with a limited presence in commodity segment and caters to domestic retail and institutions, high net worth individuals, and foreign broker dealers. The Company runs its operations through its head office based in Karachi, along with branches in Lahore, Islamabad, and Rawalpindi. The Company holds a Trading Right Entitlement (TRE) certificate issued by the Pakistan Stock Exchange Limited (PSX), holding a Trading & Self- Clearing license and license of Pakistan Commodity Exchange (PMEX). External auditors are Grant Thorton Anjum Rahman Chartered Accountants. External auditors are on the approved list of auditors in category ‘A’, published by the State Bank of Pakistan (SBP).

Assigned rating incorporates the Company’s ownership and governance framework. The Company draws support from the robust profile of the sponsors, with majority shareholding vested with Askari Bank Limited and Fauji Foundation. The board of directors comprises five members, with no independent directors on the board. Moreover, the Company has only two board committees, audit and HR, represented by only two members. Inclusion of independent and certified directors along with expansion of board committees may enhance the Company’s governance framework. Rating also takes into account strong management and client services of the Company, with client facilitation tools and contingency measures in place. However, investor grievance procedures may be strengthened for further ease in registering and tracking customer complaints. In addition, expanding business development avenues may facilitate customer reach. Internal control and regulatory compliance of the Company is considered sound. However, enhancing the scope of conflict of interest policy coupled with frequent reviewing of order recording systems may improve the internal control framework of the Company. Additionally, increasing the proportion of IDS clients may improve the credit risk profile of the Company.

Assessment of the financial profile reflects improvement in the profitability profile of the Company on the back of an increase in the brokerage revenue of the Company amid favorable market dynamics. However, operational efficiency of the Company remained on the higher side. Market risk of the Company is considered low, given a small proprietary book maintained by the Company. Liquidity profile of the Company is considered adequate. The Company has no debt on its books. However, leverage indicator remains elevated. Going forward, diversification in revenue streams, together with improvement in liquidity, efficiency and leverage indicator will be important for 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 .