PACRA Adjusts Ratings of Alfalah Securities Amid Ownership Changes

Karachi: The Pakistan Credit Rating Agency Limited (PACRA) has updated the entity ratings of Alfalah Securities (Private) Limited (ASPL), placing them on Rating Watch. ASPL, a mid-sized brokerage firm in Pakistan and a wholly-owned subsidiary of Bank Alfalah Limited, has reported financial improvements despite ongoing operational challenges.

ASPL, which offers services in equity brokerage, online trading, and advisory, among others, reported a 50% year-on-year increase in operating revenue to approximately PKR 721.5 million in the calendar year 2024. This growth coincided with an ~84% rise in the KSE-100 Index, reflecting broader sectoral expansion amid improving macroeconomic conditions.

Despite revenue growth, ASPL recorded a net loss of approximately PKR 39.6 million, narrowed from a loss of PKR 197.5 million in the previous year. The company faces ongoing cost pressures, with service expenses rising by 13.9% and administrative costs increasing by 49.2%.

ASPL’s equity position has improved to around PKR 441.7 million, bolstered by a PKR 1.2 billion capital injection from parent company Bank Alfalah. This influx reversed the prior year’s negative equity of approximately PKR 711.1 million. Bank Alfalah has increased its ownership stake to 95.59%, while CLSA’s stake has diluted to 2.93%.

In a significant development, Optimus Capital Management has entered into a Share Purchase Agreement to acquire Bank Alfalah’s stake in ASPL. The Competition Commission of Pakistan has granted regulatory clearance, with final approval pending from ASPL’s board.

The updated ratings reflect increased operational risks due to sustained financial losses and recent management changes, including the resignation of the former CEO. The placement on Rating Watch indicates ongoing developments related to the pending ownership change, governance improvements, and the company’s efforts to achieve sustainable profitability.

Future rating enhancements will depend on ASPL’s ability to improve core income, maintain market share, and diversify its revenue streams. Strengthening internal controls, retaining key personnel, and effective risk monitoring remain crucial priorities for the firm.