Press Release

VIS Assigns Initial Entity Ratings to Darson Securities Limited

Karachi, December 01, 2021: VIS Credit Rating Company Limited has assigned an initial 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’.

Incorporated in 1998, Darson Securities Limited (DSL) has a longstanding history of providing brokerage services to predominantly a domestic retail clientele. The assigned rating incorporates consistent improvement in DSL’s market positioning, as reflected by growing market share in the ready market during the past3-year period (FY19-FY21) - and DSL’s branch outreach, which spans across 7 cities of Pakistan. In recent years, along with an improvement in market share, the Company has also achieved strong growth in retail clientele, as a result of which client concentration has improved. DSL’s business risk profile is lowered by the fact that its brokerage revenues are almost entirely (~99%) derived from a domestic retail clientele.

The assigned rating is supported by the Company’s financial risk metrics. Overall exposure to credit risk is very low, while exposure to market risk is limited in terms of quantum of proprietary operations, albeit investment thresholds warrant a review. The Company’s capitalization metrics are considered conservative, wherein gearing has historically remained nil. Nevertheless, in absolute terms, the Company’s equity base stands on the lower side vis-à-vis peer median. Given projected growth in business volumes and low level of internal capital generation capacity, external infusion may be warranted over the medium term horizon. In the period reviewed, the Company maintained a policy of full profit retention, which is viewed positively.

Rating is 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 CG best practices.


For further information on this rating announcement, please contact the undersigned (Ext: 306) or Arsal Ayub (Ext: 216) at 021-35311861-71 or fax to 021-35311872-3.







Faryal Ahmad Faheem
Deputy CEO

Applicable rating criteria: Methodology - Securities Firms Rating (July 2020)
https://s3-us-west-2.amazonaws.com/backupsqlvis/docs/SecuritiesFirm202007.pdf

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