Alfalah Securities (Pvt.) Limited (Formerly: Alfalah CLSA Securities (Pvt.) Limited)

CREDIT RATING REPORT | Apr-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
23-Apr-25 A- A2 Stable Maintain YES
23-Apr-24 A- A1 Stable Maintain YES
28-Apr-23 A- A1 Stable Maintain -
29-Apr-22 A- A1 Stable Maintain -
04-May-21 A- A1 Stable Maintain -
About the Entity

Alfalah Securities (Pvt.) Limited (Formerly: Alfalah CLSA Securities (Pvt.) Limited) holds a Trading Right Entitlement Certificate (TREC) for the Pakistan Stock Exchange (PSX) and has operated as a private limited company since its establishment. Registered with the Securities and Exchange Commission of Pakistan (SECP) under the Securities Brokers Regulations, 2016, ASPL functions as a subsidiary of Bank Alfalah Limited, one of Pakistan's premier commercial banking institutions, which maintains a 95.59% majority ownership. The company's governance structure features a six-member board of directors, including the Chief Executive Officer, Mr. Masood Ebrahim.

Rating Rationale

Alfalah Securities (Private) Limited (“ASPL” or “the Company”), a wholly-owned subsidiary of Bank Alfalah Limited, operates as a mid-sized brokerage firm in Pakistan, providing a broad range of services encompassing Equity Brokerage, Online Trading, Commodity Trading, Research, Investment Banking, Forex, Money Market, and Advisory Services. The Company benefits from the financial backing of its parent, a leading commercial bank, which partially mitigates liquidity and funding risks. During CY24, Pakistan’s brokerage sector expanded, supported by an ~84% increase in the KSE-100 Index, amid improving macroeconomic indicators. ASPL achieved a commendable 50% year-over-year revenue expansion to PKR 721.5 million in CY24. This performance represents a material improvement from the previous fiscal year, transitioning from a net loss position of PKR 197.5 million in CY23 to a net profit of PKR 12.1 million. While these results indicate positive operational momentum, the organization continues to face margin compression due to escalating operational expenditures. Specifically, service expenses grew by 13.9% while administrative costs surged 44.9%, creating significant earnings headwinds that partially offset revenue gains. The Company’s equity position improved to ~PKR 493.4 million following a capital injection of PKR 1.2 billion from Bank Alfalah, reversing the prior year's negative equity of ~PKR 711.1 million. Ownership concentration increased as Bank Alfalah’s stake rose to 95.59%, while CLSA’s holding diluted to 2.93%. In parallel, Optimus Capital Management has entered into a Share Purchase Agreement to acquire Bank Alfalah’s stake, with regulatory clearance obtained from the Competition Commission of Pakistan (CCP) and final approval pending from ASPL’s board. The updated ratings of ASPL’s reflects elevated operational risk, stemming from sustained financial losses and recent management turnover, including the resignation of the former CEO following significant provisioning events, as publicly reported. The placement of the ratings on Rating Watch captures ongoing developments related to the pending change in ownership, governance enhancements, and the Company’s ability to restore sustainable profitability.

Key Rating Drivers

Going forward, enhancing the rating perspective hinges on improving core income, retaining market share, and diversifying revenue in brokerage. Upholding sound internal controls, retaining key personnel, and diligent risk monitoring are also vital.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Alfalah Securities (Pvt.) Limited (Formerly: Alfalah CLSA Securities (Pvt.) Limited)

rating analysis

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Profile
Background

Alfalah  Securities (Pvt.) Limited ("ASPL" or ''The Company") is a Private Limited Company and holds the Trading Rights Entitlement Certificate (TREC) from Pakistan Stock Exchange - PSX. The Company is licensed from Securities and Exchange Commission of Pakistan. The Company was incorporated on 23rd September 2003 under then Companies Ordinance, 1984 and commenced its operations on 25th March 2004.


Operations

The Company is primarily engaged in the business of equity brokerage, investment banking/corporate finance and research.


Ownership
Ownership Structure

Alfalah Securities (Private) Limited is a subsidiary of Bank Alfalah. Previously, Bank Alfalah held 62% stake in the Company, while CLSA owned 25%. However, due to ongoing financial losses, Bank Alfalah injected additional equity, due to which the stake of CLSA has been diluted to 2.93%, and Bank Alfalah’s ownership stake increased to 95.59%. As a result of this substantial ownership change, bank Alfalah decided to rename the Company.


Stability

The holding Company "Bank Alfalah" is one of the largest private bank in Pakistan, it has a widespread network of 957 branches in more than 200 cities in Pakistan and also has an international presence in Bangladesh, Bahrain & U.A.E. The Institutional ownership of CLSA a Hong Kong based based institutional brokerage and investment group, subsidiary of CITIC Securities, the largest securities company in China, also bodes well for stability.


Business Acumen

The Company's sponsors, Bank Alfalah Limited and CLSA are prominent institutions of financial service sector. Bank Alfalah is a prominent bank owned and managed by Abu Dhabi group. CLSA is the leading investment group of East Asia. Whereas, Mr. Aliuddin Ansari is a seasoned professional having more than 31 years of experience in both local and international institutions.


Financial Strength

Bank Alfalah has a long-term rating of AAA and a short-term rating of A1+ and reported equity of ~PKR 178bln as at end-Dec'24.


Governance
Board Structure

The Company's board comprises of six board members, including the CEO out of which four board members represent Bank Alfalah. Mr. Aasim Wajid Jawad is entrusted with the responsibility of chairman of the board.


Members’ Profile

The Board members have strong educational background and diversified experience which provides seasoned guidance to the Company. Mr. Faisal Rabbani, Mr. Aasim Wajid Jawad possess more than 2 decades of seasoned experience with renowned financial institutions both locally and internationally. Mr. Asim Wajid Jawad is FCA from Institute of Chartered Accountants in England & Wales.


Board Effectiveness

The board meets on quarterly basis to evaluate the performance of the Company. The diversified experience of the board members provide useful insight in governing company's affairs.


Transparency

The Company has transitioned its internal audit services from BDO to KPMG. The external auditor, A.F. Ferguson & Co., is listed in Category 'A' of the State Bank of Pakistan’s (SBP) approved auditor panel. For the calendar year 2023 (CY-23), the auditors issued an unqualified opinion on the financial statements.


Management
Organizational Structure

The Company has well-defined organization structure with a proper chain of command and departmentalization. All departments are led by experienced professionals.


Management Team

The Company's experienced senior management team is directly reportable to the CEO. Mr. Masood (CEO) is a dynamic and visionary leader with over 28 years of diverse experience in both international and domestic markets. Mr. Ahmad Zakir Hafeez serves as the Chief Financial Officer at Alfalah Securities (Pvt) Limited, bringing with him over two decades of experience and expertise in the financial sector.


Management Effectiveness

The Company has implemented technology driven front and back office system acquired from approved vendor of SECP. Both of the front and back office software are integrated and generates real time based MIS reports for management use.


Control Environment

The Company has engaged KPMG Chartered Accountants to oversee its internal audit function, ensuring independent and rigorous evaluation. The Compliance Department conducts ongoing monitoring of controls and systems to guarantee full alignment with applicable policies, procedures, and regulatory requirements.


Business Risk
Industry Dynamics

Low market P/E multiples, declining interest rates, and improving macro-economic indicators renewed investor confidence during CY24, resulting in high volumes for the brokerage industry. The trend has continued in CY25, with significant rate cuts providing the impetus to investors to shift their investments from fixed income to the equity market. The market P/E ratio is still considered low with ample room to improve, indicating that the brokerage industry shall continue to enjoy high volumes during CY25.


Relative Position

The average market share of the Company on value traded basis stood at ~4.8% for CY24.


Revenues

The Company recorded operating revenues of PKR 721.5mln in CY24, representing a significant increase from PKR 482.5mln in CY23. ASPL reported a net profit of PKR 12.1mln in CY24, marking a substantial recovery from the PKR 197.5mln net loss recorded in the previous year. This performance improvement was primarily driven by a 225% growth in other operating income coupled with a 50% reduction in financing costs.


Cost Structure

During CY24, the Company's non-current liabilities stood at PKR 359.3 million, reflecting a substantial 472% year-over-year increase. This significant growth was principally driven by the acquisition of a long-term loan amounting to approximately PKR 300 million.


Sustainability

The Company has opened new branches for geographical diversification. Plans are in place to use technology for penetration in the retail segment.


Financial Risk
Credit Risk

In addition to KYC, Customer Due Diligence (CDD) and Enhance Due Diligence (EDD) procedures are in place for the assessment of its client creditworthiness. The entire EDD process is comprehensive and well documented, especially in the account opening and client risk assessment stages. The documents gathered from this mined data is used for reporting suspicious activities, anti-money laundering policies and other irregular transactions.


Market Risk

The Company is running a proprietary book with an approximate value of PKR 52.8mln at end-Dec'24, which constitites only 11.95% of the equity and exposes the the low market risk of the Company. However, it has established an appropriate proprietary trading policy.


Liquidity Risk

As of Dec'31, 2024, the Company’s current assets stood at approximately PKR 1,706.7mln (Dec'23: PKR 1,477.3mln), against current liabilities of PKR 1,020.8 mln (Dec'23: PKR 2,237.2mln). This represents a favorable liquidity position, as current assets sufficiently cover the Company’s current liabilities.


Capital Structure

As of Dec'24, the Company's equity stands at PKR 493.4mln, a significant improvement from the negative equity of PKR 711mln recorded in Dec'23. This positive turnaround was achieved through a PKR 1.2bln equity injection by the sponsors, reinforcing the Company's financial stability.
 
 

Apr-25

www.pacra.com

Alfalah Securities (Pvt.) Limited (Formerly: Alfalah CLSA Securities (Pvt.) Limited)

financial summary

(PKR mln)

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Dec-24
12M		 Dec-23
12M		 Dec-22
12M
A. BALANCE SHEET
1. Finances 0 0 0
2. Investments 53 137 15
3. Other Earning Assets 0 512 183
4. Non-Earning Assets 1,821 939 1,677
5. Non-Performing Finances-net 0 0 0
Total Assets 1,874 1,589 1,875
6. Funding 328 402 471
7. Other Liabilities (Non-Interest Bearing) 1,052 1,898 1,064
Total Liabilities 1,380 2,300 1,535
Equity 493 (711) 341
B. INCOME STATEMENT
1. Fee Based Income 721 482 405
2. Operating Expenses (744) (519) (344)
3. Non Fee Based Income 152 197 56
Total Opearting Income/(Loss) 130 160 117
4. Financial Charges (164) (329) (129)
Pre-Tax Profit (34) (169) (12)
5. Taxes 46 (29) 19
Profit After Tax 12 (198) 7
C. RATIO ANALYSIS
1. Cost Structure
Financial Charges / Total Opearting Income/(Loss) 125.8% 205.3% 110.0%
Return on Equity (ROE) 3.2% 35.9% 3.3%
2. Capital Adequacy
Equity / Total Assets (D+E+F) 26.3% -44.8% 18.2%
Free Cash Flows from Operations (FCFO) / (Financial Charges + Current Maturity of Long Term Debt + Uncovered Short Term Borrowings) -18.9% -51.3% 103.6%
3. Liquidity
Liquid Assets / Total Assets (D+E+F) 90.5% 37.9% 79.4%
Liquid Assets / Trade Related Liabilities 171.9% 39.8% 209.9%
4. Credit & Market Risk
Accounts Receivable / Short-term Borrowings + Advances from Customers + Payables to Customers 29.8% 24.3% 98.1%
Equity Instruments / Investments 100.0% 100.0% 100.0%

Apr-25

www.pacra.com

Alfalah Securities (Pvt.) Limited (Formerly: Alfalah CLSA Securities (Pvt.) Limited)

rating scale

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Apr-25

www.pacra.com

Alfalah Securities (Pvt.) Limited (Formerly: Alfalah CLSA Securities (Pvt.) Limited)

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
  2. Restrictions
    1. No director, officer, or employee of PACRA communicates the information acquired by him for use for rating purposes to any other person, except where required under law to do so. (Chapter III; 10-(5))
    2. PACRA does not disclose or discuss with outside parties or make improper use of the non-public information which has come to its knowledge during a business relationship with the customer. (Chapter III; 10-7-(d))
    3. PACRA does not make proposals or recommendations regarding the activities of rated entities that could impact a credit rating of the entity subject to rating. (Chapter III; 10-7-(k))
  3. Conduct of Business
    1. PACRA fulfills its obligations in a fair, efficient, transparent, and ethical manner and renders high standards of services in performing its functions and obligations. (Chapter III; 11-A-(a))
    2. PACRA uses due care in the preparation of this Rating Report. Our information has been obtained from sources we consider to be reliable, but its accuracy or completeness is not guaranteed. PACRA does not, in every instance, independently verify or validate information received in the rating process or in preparing this Rating Report. (Clause 11-(A)(p))
    3. PACRA prohibits its employees and analysts from soliciting money, gifts, or favors from anyone with whom PACRA conducts business. (Chapter III; 11-A-(q))
    4. PACRA ensures before the commencement of the rating process that an analyst or employee has not had a recent employment or other significant business or personal relationship with the rated entity that may cause or may be perceived as causing a conflict of interest. (Chapter III; 11-A-(r))
    5. PACRA maintains the principle of integrity in seeking rating business. (Chapter III; 11-A-(u))
    6. PACRA promptly investigates in the event of misconduct or a breach of the policies, procedures, and controls, and takes appropriate steps to rectify any weaknesses to prevent any recurrence, along with suitable punitive action against the responsible employee(s). (Chapter III; 11-B-(m))
  4. Independence & Conflict of Interest
    1. PACRA receives compensation from the entity being rated or any third party for the rating services it offers. The receipt of this compensation has no influence on PACRA’s opinions or other analytical processes. In all instances, PACRA is committed to preserving the objectivity, integrity, and independence of its ratings. Our relationship is governed by two distinct mandates: i) rating mandate - signed with the entity being rated or issuer of the debt instrument, and ii) fee mandate - signed with the payer, which can be different from the entity.
    2. PACRA does not provide consultancy/advisory services or other services to any of its customers or their associated companies and associated undertakings that are being rated or have been rated by it during the preceding three years, unless it has an adequate mechanism in place ensuring that the provision of such services does not lead to a conflict of interest situation with its rating activities. (Chapter III; 12-2-(d))
    3. PACRA discloses that no shareholder directly or indirectly holding 10% or more of the share capital of PACRA also holds directly or indirectly 10% or more of the share capital of the entity which is subject to rating or the entity which issued the instrument subject to rating by PACRA. (Chapter III; 12-2-(f))
    4. PACRA ensures that the rating assigned to an entity or instrument is not affected by the existence of a business relationship between PACRA and the entity or any other party, or the non-existence of such a relationship. (Chapter III; 12-2-(i))
    5. PACRA ensures that the analysts or any of their family members shall not buy, sell, or engage in any transaction in any security which falls in the analyst’s area of primary analytical responsibility. This clause, however, does not apply to investments in securities through collective investment schemes. (Chapter III; 12-2-(l))
    6. PACRA has established policies and procedures governing investments and trading in securities by its employees and for monitoring the same to prevent insider trading, market manipulation, or any other market abuse. (Chapter III; 11-B-(g))
  5. Monitoring and Review
    1. PACRA monitors all the outstanding ratings continuously, and any potential change therein due to any event associated with the issuer, the security arrangement, the industry, etc., is disseminated to the market immediately and in an effective manner after appropriate consultation with the entity/issuer. (Chapter III; 17-(a))
    2. PACRA reviews all the outstanding ratings periodically on an annual basis. Provided that public dissemination of annual review and in an instance of change in rating will be made. (Chapter III; 17-(b))
    3. PACRA initiates an immediate review of the outstanding rating upon becoming aware of any information that may reasonably be expected to result in downgrading of the rating. (Chapter III; 17-(c))
    4. PACRA engages with the issuer and the debt securities trustee to remain updated on all information pertaining to the rating of the entity/instrument. (Chapter III; 17-(d))
  6. Probability of Default
    1. PACRA’s Rating Scale reflects the expectation of credit risk. The highest rating has the lowest relative likelihood of default (i.e., probability). PACRA’s transition studies capture the historical performance behavior of a specific rating notch. Transition behavior of the assigned rating can be obtained from PACRA’s Transition Study available at our website. (www.pacra.com) However, the actual transition of rating may not follow the pattern observed in the past. (Chapter III; 14-3(f)(vii))
  7. Proprietary Information
    1. All information contained herein is considered proprietary by PACRA. Hence, none of the information in this document can be copied or otherwise reproduced, stored, or disseminated in whole or in part in any form or by any means whatsoever by any person without PACRA’s prior written consent.

Apr-25

www.pacra.com