The Pakistan Credit Rating Agency Limited
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PACRA Maintains Entity Ratings of Service Industries Limited

Rating Type Entity
(19-Sep-23 )
(24-Sep-22 )
Action Maintain Maintain
Long Term AA- AA-
Short Term A1 A1
Outlook Stable Stable
Rating Watch - -

Service Industries Limited (‘SIL’ or ‘the Company’) maintains twofold profile; one as a holding company (comprising substantial investment in Service Global Footwear Limited & Service Long March Tyres (Pvt.) Limited) and second as an operating company. With clientele base spread across the globe, the group has built itself as an acclaimed player through channeling high-quality products and affirmation of multi-brand strategy under its umbrella. As an operating entity, SIL executes its business activities in tyres & tubes and footwear markets under eminent brand name ‘Servis’ and also involves in the sales of technical rubber products and spare parts for automobiles. The ratings reflect Company's longstanding presence in given industry environment underpinned by the foundation stone for Servis Group. To manage risk, align financial goals, and ensure growth opportunity; SIL attained reasonable diversification in its revenue streams coming from tyres & tubes manufacturing, footwear, technical rubber products and spare parts for automobiles. Challenging macroeconomic indicators like raw materials prices, currency devaluation, policy hike, & spike in energy costs have squeezed the margins of related industries. Management intends to materialize the envisaged strategies by capitalizing on the brand image of Servis and yield added results in near future. On export front, Service Global Footwear Limited is an established entity, thus adding overall strength by providing a steady stream of dividends. Service Long March Tyres (Pvt.) Limited has become profitable in its second year of operations, this investment is of strategic nature and will add to the financial strength of Servis group. The sponsors are keenly focused towards formalized group structure to ensure smooth flow of investments through sustainable business models and eyes for possible expansions in new business avenues. SIL signified upward trajectory in its business volumes amid stiff competition on a timeline basis. During 1HCY23, revenues witnessed a growth of ~24.7% (on annualized basis) primarily on back of inflationary prices and slightly higher volumes. Furthermore, the Company’s profitability margins have showed improvement at all levels owing to better pricing strategy coupled with stiff cost control. Financial risk profile is demonstrated by modest coverages, cash flows, & working capital cycle. Capital structure is leveraged as SIL funds its expansion by means of debt availed at concessionary rates, making the debt profile adequate. However, the business muscle and financial arm of the group is a comfort. Rating also incorporates strong sponsor support augmented by sound governance practices and methodical internal control system over the years.
The ratings are dependent on sustenance of Company’s leading position in its respective business niches and consistent growth under challenging business environment. Profitability in line with business expansion; prudent working capital management and maintenance of coverages shall remain imperative.

About the Entity
Service Industries Limited is a public listed entity, incorporated in 1957. It has three business segments: i) Tyres & Tubes: agri, and 2 & 3-wheelers’ tyres, (ii) Footwear: varieties of leather shoes and its retail operations, iii) Technical Rubber Products & Spare parts for automobiles: manufactured and sold by the Company. Domestically, the Company operates under brand name of 'Servis' with 208 retail outlets spread across the country. It is one of the largest manufacturers of footwear and tyres & tubes (Agri and 2 & 3-wheelers). It is a prominent export player of the country for 10+ years. Majority stake vests with the sponsoring family. The directors, CEO, their spouses & minor children own ~44.78% collectively. The Board comprises nine members, with three independent directors, two executive directors & four non-executive directors. Ms. Uzma Adil Khan is the Board’s Chairperson.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.