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The Pakistan Credit Rating Agency Limited

Date
12-May-2017
Analysts
Rai Umar Zafar
rai.umar@pacra.com

+92-42-35869504
www.pacra.com
Applicable Criteria

  • Methodology | Securities Broker (Mar 17) [View]

Related Research

  • Sector Study | Securities Brokers (Nov 16) [View]
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JS Global Capital Issuing Commercial Paper; PACRA Assigns Ratings
 Rating Type Debt Instrument
Current
(12-May-2017)
 Action Initial
 Long Term AA
 Short Term A1+
 Outlook Stable
 Rating Watch -

The ratings reflect JSGCL's prominent position in the brokerage industry emanating from an established franchise with sizeable and growing market share, and a sound operating platform. The ratings incorporate JSGCL's robust financial profile characterized by strong risk absorption capacity owing to its healthy liquidity profile. The company has adopted a dynamic approach towards further enhancing its market share, branch network, software development, while developing new products. The company's investment portfolio, in compliance with its Investment Policy Statement to invest in 'A' and above rated avenues, is dominated by bank placements (rated A+ and above) and equity spread transactions which provide a stable stream of income. The investment book remains a source of comfort amidst inherently volatile brokerage volumes. Moreover, prohibition in proprietary trading in equities limits the company's exposure to market risk. The ratings recognize JSGCL's parentage – JS Bank. JS group carries extensive experience in capital markets.

The ratings are dependent on the company's ability to effectively enhance its penetration in the retail market and international business. Further strengthening of the strong internal control framework and retention and nurturing of key human resources remain imperative for JSGCL.
About the Entity
JSGCL, with commercial operations starting in May 2003, carries the legacy of stock brokerage business initiated in the early seventies by Mr. Jahangir Siddiqui. The company operates through eight branches; Lahore, Islamabad, Faisalabad, Abbottabad, Peshawar, Multan, and Hyderabad besides the head office based in Karachi. Its main activities include brokerage, corporate finance, financial advisory, forex, and money market activities. The company is listed on Pakistan Stock Exchange (PSX). JS Bank Limited (JSBL) and Global Investment House (GIH) are the major shareholders of the company each holding 67% and 27% stake in JSGCL, respectively.

The board of directors (BoD) of JSGCL, including the CEO, comprises eight experienced professionals. Three members represent JS Bank. GIH has also nominated three well qualified and resourceful members. The remaining one member is independent director. Syed Hasan Akbar Kazmi, Chairman of the Board, carries vast experience in financial industry with experience across diverse sectors. Mr. Kamran Nasir, the CEO, is a seasoned professional with around two decades of experience in the financial sector, including Investment Banking, Brokerage and Audit.

About the Instrument
JCGCL plans to issue a short-term, unlisted Commercial Paper (CP) of PKR 1,000mln (inclusive of Greenshoe Option of PKR 300mln) to fund the ongoing business segment – Ready Buy Future Sell. The CP will have a tenor of six months, and will carry a profit rate of 6M KIBOR + 175 bps. The CP will be unsecured. Redemption will be at face value at maturity. Since this is an unsecured instrument, it carries the same rating as the entity, which is being reaffirmed at “AA” (Double A) (Long Term) and “A1+” (A One Plus) (Short Term).
The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.
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