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Karachi, VIS Credit Rating Company Ltd. (VIS) has once again asserted the Broker Management Rating of Next Capital Limited (NCL) at ‘BMR2++’. With a ‘Stable’ outlook attached, this action follows the previously announced rating on June 21, 2022.
According to VIS Credit Rating Company Limited, this rating denotes NCL’s strong adherence to external controls and robust compliance and risk management practices. The rating particularly takes note of the company’s impressive regulatory framework and supervision. The board of directors, with its seven-member composition, comprises three sponsoring members holding roughly 51% of the company’s shareholding, and two independent members. This governance structure is further fortified by four board committees: the audit committee, risk management committee, investment committee, and the HR committee.
NCL’s diversified revenue stream, bolstered by income from advisory and consultancy roles, played a pivotal role in this rating. The company’s strong stance on compliance and risk management, demonstrated by its independent operating internal audit, compliance, and risk departments, was also highlighted. The Company has also implemented a risk management policy tailored to different client categories, and it does not extend credit limits to retail clients.
VIS commended the company’s transparency and disclosure practices, characterizing the external control framework as robust. While the internal control framework is deemed sound, VIS noted that there’s room for further strengthening, especially in terms of expanding internal policies, such as the employee trading and conflict of interest policies. NCL’s deployment of electronic trading platforms for clients was also acknowledged, though VIS recommended enhancing the visibility of the investor grievance procedures on the company’s website.
Financially, the company experienced a dip in its earnings during the 9-month period ending in FY23, mostly due to a reduction in brokerage income. Despite this, the company saw an increase in income from advisory and consultancy roles compared to the same period the prior year. This culminated in operating losses and an elevated cost-to-income ratio. On the upside, the company’s liquidity profile exhibited significant improvement, even as its equity decreased due to incurred losses. The company’s gearing and leverage ratios remain within acceptable bounds. For future ratings, the focus will be on expanding the revenue base, increasing equity, and efficiently managing operational expenses.
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