The Pakistan Credit Rating Agency Limited
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Kanwal Ejaz

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PACRA Maintains Entity Ratings of Secure Logistics Group Limited

Rating Type Entity
(14-Oct-23 )
(15-Oct-22 )
Action Maintain Maintain
Long Term A A
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Secure Logistics Group Limited (“SLG or the Company”) is a growth-oriented company engaged in synergetic logistics, vehicle fleet management and security services businesses. The logistic business focuses on transportation of cargos over long and medium distances through its long-haul and distribution segments. LogiServe (Pvt) Ltd and Fist Security (Pvt) Ltd, SLG subsidiaries, are involved in vehicles’ tracking and advanced fleet management solutions and security services, respectively. The ratings reflect a committed shareholder group including prominent international investors that provided close support in form of subordinated loans during the adverse macroeconomic conditions;a robust governance structure; well-established B2Bclientele base; and professionally qualified management that has steered the Company’s operation in a difficult macro business environment. Lately the logistics industry faced formidable challenges in the form of increase in input costs due to rupee devaluation, soaring inflation and increased interest rates; leading to a reduction in profit margins. However, the gradual increase in Regional trade with Central Asian Region, specifically Turkmenistan and enroute Afghanistan, provided a reasonable impetus to the road transportation sector of the logistic industry. During CY22 the Company’s top line grew by ~6% mainly due to price inflation, however, margins showed some dilution at all levels. The Company’s Board of Directors decided to transform SLG from a traditional to tech-based logistics operations. Resultantly, the Company, through its fully owned subsidiary, LogiServe acquired a license from the Special Technology Zone Authority (“STZA”). The ensuing amalgamation of LogiServe into SLG and the planned tech pivot from traditional to tech-enabled logistics through a contracted B2B Marketplace and related package of software modules is expected to expedite the scaling up of logistic business and accrue substantial tax savings. As part of its expansion strategy, SLG has also re-initiated the IPO process and plans to use almost 80% of the IPO proceeds to deleverage its Balance Sheet. It is expected to considerably enhance the bottom line due to a reduction in the Interest Expense. In addition, the Company plans to utilize the IPO proceeds to complete its Tech Pivot, establish its Regional network with focus upon Central Asia, make monor addition as to its Distribution Fleet, initiate the new warehousing business to become a 3 PL player and make other improvements in its commercial fleet. The management has a conservative appetite for any incremental borrowings. Financial risk profile of the Company is considered adequate with comfortable coverages, cashflows, and working capital cycle. Capital structure is moderately leveraged and mainly comprise of long-term vehicle fleet lease financings.
The ratings are dependent upon the improvement in business profile and successful implementation of business strategy. A prudent financial performance an effective liquidity profile, and maintaining financial discipline shall remain imperative.

About the Entity
SLG is a public unlisted company, providing logistics and fleet management services to leading corporates, banks, insurance and leasing firms. The Company’s sponsors are seasoned professionals with exposure to private and public sectors. Mr. Pervaiz Khan (Executive Director) has more than four decades of experience in public and private sectors with focus upon investment banking and energy industries. Mr. Gulraiz Khan (CEO) has been managing the SLG business for over 13 years.

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.