The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Maintains Entity Ratings of Pakistan Services Limited

Rating Type Entity
(24-Mar-22 )
(24-Mar-21 )
Action Maintain Maintain
Long Term A A
Short Term A1 A1
Outlook Developing Negative
Rating Watch Yes Yes

Pakistan Services Limited’s (The Company) has a leading position in the hospitality industry. Hospitality and tourism industry has rebounded now after the severe breakdown of Covid-19. Hotel industry is allowed to operate under specific SOPs, which led the Company to have increased capacity utilization, thus, company has achieved profitability in IHFY22. Occupancy rate and increased average daily room rate has given an up rise trend towards revenues. Company has managed to achieve alignment of its cash flows with current debt repayments and the previous deferment of long-term debts has given an ease to liquidity pressures. Currently, company has strong cashflows to cater the current needs and it is expected to have adequate liquid position in near future as proceeds from disposal of non-core assets of the company materializes. Company has developed a detailed strategic plan towards the future trajectory and it is entering into new franchise agreements which will help in growth and increased margins of the company. Company has also strengthened its marketing department by going into digitalization and to cater the new prospects. Capital structure of the Company reflects leveraging with large asset base and coverages has become strong due to improved cashflows. Financial support from sponsors remains imperative.
Ratings are dependent on effective implementation of envisaged strategy to improve cashflows while maintaining modest leveraging and strengthening coverages. Any significant delay in commencement of new projects and or further deterioration in margins coupled with low occupancy rate leading to weak coverages and pressure on liquidity, will have a negative impact on ratings. Meanwhile, maintaining sufficient cushion for debt repayment remains crucial. Outlook on the entity is negative while rating watch maintained. In this respect, removal of material uncertainty related to going concern as documented by the external auditors is important.

About the Entity
Pakistan Services Limited was established in 1958 and is quoted on the Pakistan Stock Exchange. It owns and operates Pearl Continental Hotels – the largest hotel chain of the country with 1,526 rooms. The Company has a nine-member BoD, with three independent members. Mr. Sadruddin Hashwani – founder of the Hashoo Group – is the Chairman of the board. He has experience of over 5 decades of managing different businesses. Mr. Murtaza Hashwani acts as the Chief Executive Officer of the Company.

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