PACRA Maintains Entity Ratings of KTrade Securities Limited

Lahore, November 23, 2022 (PPI-OT):KTRADE Securities Limited (“KTRADE” or the “Company”) is an emerging brokerage house re-launched in 2018 with an aim to provide technology-driven and innovative products to the retail investors. KTRADE mainly provides the services of equity brokerage. The business model of equity brokers is inherently prone to market volatility. During FY22, rising inflation and interest rate environment impaired the investors sentiments, resulting in a decline of volumetric activity at PSX. Consequently, the traded volumes of KTRADE also suffered and fell by ~32% in FY22 on YoY basis.

KTRADE earned commission on equity brokerage of ~PKR 119mln in FY22 as compared to ~PKR 158mln in FY21 reflecting a reduction of ~PKR 39mln or ~25%. However, to augment the revenue stream, KTRADE has setup the corporate finance department for advisory services for which the license was acquired in CY21. KTRADE has earned ~PKR 6mln in terms of advisory revenue in FY22. The services of margin trading/financing are also available; however, the quantum is minimal. With an aim to provide technology-driven and innovative products to the retail investors, KTRADE is aggressively investing in its technological platform and human capital for the purpose of enhancing the user base.

This is reflected in the administrative and operating expense which has increased by ~PKR 107mln or 65% in FY22 on YoY basis. KTRADE has suffered a loss of ~PKR 116mln in FY22 primarily due to an upsurge in operating expenses. To support the expansion strategy, further equity has been injected during FY22. The Company’s equity stands at ~PKR 533mln at end-Jun’22. The ratings incorporate the sponsors’ business acumen, seasoned management team and a strong control environment. KTRADE has outsourced its internal audit function and has devised proficient risk assessment procedures. Recently, the Company has also strengthened its governance framework with the addition of two independent directors. The rating takes comfort from a low leveraged capital structure.

The ratings are dependent on the management’s ability to strengthen revenue base by augmenting consultancy and advisory services. Improvement in market share and sustaining profitability from core operations remain critical. Meanwhile, upholding strong internal controls, sound governance structure, retention of key management personnel and diligent monitoring of risks is important.

For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425