The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Revises Entity Ratings of Pakistan Services Limited | Negative Outlook | RW

Rating Type Entity
(15-Mar-23 )
(24-Mar-22 )
Action Downgrade Maintain
Long Term A- A
Short Term A2 A1
Outlook Negative Developing
Rating Watch Yes Yes

Ever since the pandemic of Covid-19, the hotel sector has been under pressure. The relief provided by the regulator furnished much-needed respite to the players. While occupancy level became a challenge, the cost of doing business witnessed a constant rise. The aforementioned financial relief helped the company in avoiding immediate collapse, though issues and challenges persisted. In full cognizance of the situation, the company was pursuing a sale plan of its fixed assets, primarily properties. Post Covid-19, the operational cashflows improved, though these were considered insufficient by the management to make repayments. The management was hopeful to complete the sale transaction of the company's properties to remain afloat. They were able to sell a few but some big large assets could not be disposed off as targeted. Over the last couple of months and especially after the rise in political instability, unprecedented increase in interest rates and hyperinflation, the management started to face material uncertainty around the company's operations, as disclosed in the recent published financial statements. This led to the revision and adjustment of ratings. The management has represented that they have express intention to settle the debt, while aligning the financial obligations with the operational realities. A detailed plan is under discussion with lenders, wherein the company is settling the debt over the future course of time. A sizeable portion of the debt would be linked with the sale of some of the prime properties that the company owns, while the rest would be aligned to the emerging pattern of cashflows. The management seems to be confident and committed about it. The success of these initiatives is crucial to the future ratings of the company. Sustainability of operations and materialization of optimal cashflows are important.
Pakistan Services Limited (“PSL” or “The Company”) is known for its flagship hotel chain in Pakistan: “Pearl Continental (PC)”. Hospitality and tourism industry of Pakistan is segmented by inbound and outbound tourism, and there are various types of hotels starting from economy and low-budget categories to premium and luxury hotels. Pakistan has emerged as one of the most favorite outbound tourist destinations, due to its rich culture and landscape diversity, a real attraction to foreign tourists. Inbound tourism is also promoted by the rising attractions of northern areas, which is supported by improved infrastructure and facilities.

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 1,394 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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