Karachi, May 21, 2021 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has reaffirmed entity ratings of ‘A-/A-2’ (Single A Minus/A-Two) to Growth Securities (Private) Limited (GSPL). The long term rating of ‘A-’ signifies good credit quality with adequate protection factors. Risk may vary slightly from time to time because of economic conditions. Short term rating of ‘A-2’ depicts good certainty of timely payment where liquidity factors are sound and good access to capital markets. Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on May 19, 2020.
The assigned ratings incorporate company’s moderately leveraged capital structure, satisfactory operating profitability and adequate liquidity indicators. However, ratings are constrained by governance and internal control framework of the company which may be improved through inclusion of additional directors and increased oversight.
During the period under review, GSPL posted strong revenue growth, albeit the topline composition was less diversified on a timeline. The management is pursuing a strategy of diversification, wherein dedicated resource has been hired for underwriting and advisory. Some headway was also made in this regard, which included healthy uptick in institutional clientele and diversification of brokerage revenue. Diversification of business activity will be crucial in sustaining a more robust earnings base, thereby offsetting downside risk emanating from the investment portfolio and providing support to the company’s overall risk profile.
On the back of healthy growth in revenue base, improvement was also noted on the company’s bottom line. Given the fact that GSL mainly earns from ready future arbitrage, wherein infrastructure related fixed cost is low vis-à-vis traditional brokerage business, the company’s efficiency ratio compares favourably to peers. Future ratings remain dependent on maintenance of rating benchmarks, low leverage indicators, retention of key personnel, sustainability of operating profitability and successful execution of envisaged business plan. Meanwhile, strengthening of internal controls and diligent monitoring of risks is also important from ratings perspective.
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
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