VIS Reaffirms Entity Ratings of Intermarket Securities Limited

Karachi, December 04, 2020 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of Intermarket Securities (IMS) at ‘A-/A-2’ (A minus/A-Two). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on September 05, 2019.

Ratings reaffirmation takes into account the established and sustained market position of IMS as a mid-sized player in equity brokerage business. Ratings also factor in the turnaround in financial performance owing to uptick in industry trading volumes, implementation of revised commission structure and cost control measures. Moreover, improvement in capitalization through planned conversion of director’s loan into equity, low leveraged capital structure and adequate liquidity buffers continue to provide support to overall financial risk profile.

Ratings are constrained by the company’s significant dependence on equity brokerage operations and limited diversification of income streams. Going forward, future sales strategy of focusing on leveraging digital platforms and digital marketing channels along with materialization of available corporate advisory mandate would be important from rating perspective. The ratings would remain dependent upon maintenance of performance indicators at sound levels commensurate with the assigned ratings.

Market volumes showcased an increase of around ~27% in FY20 largely driven by high index volatility experienced during the period (given the impact of covid-19 and subsequent economic recovery). The growth momentum continued in the ongoing fiscal year with overall PSX volumes witnessing a four-fold increase vis-à-vis corresponding period last year.

The outlook for the brokerage industry is favorable in the ongoing year given the economic stabilization measures taken by the government; however, competitive forces for market share would increase and thus the revenue diversification would become more important, going forward. In the continuation of Covid-19, government’s support to businesses (specifically essential industries) through implementation of smart lockdowns limits the risk arising from the second wave to some extent. Besides, political uncertainty also remains a risk factor.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873

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