PACRA Assigns Positive Outlook to Service Tyres (Pvt.) Limited

Service Tyres (Private) Limited (hereafter referred as ‘STPL’ or ‘the Company’), a wholly owned subsidiary of Service Industries Limited (SIL), is a prominent brand in Pakistan’s tyre industry. With over three decades of presence in the tyre industry, Servis Tyres has built an established track record and brand recognition. Its product portfolio spans 2/3-wheeler, ULT, and agricultural tyres, as well as tubes and auto spare parts, catering to both OEM and replacement markets. The Company retains a dominant position in the two- and three-wheeler and light commercial vehicle bias tyre categories. STPL benefits from strong brand equity and an extensive distribution network, spanning both nationwide and abroad. In addition, the Company sustains a strong presence in export markets, complementing its established leadership in the local industry. The Company efficiently operates a modern state- of-the-art production facility in Gujrat, enabling it to serve both domestic and export markets. Demand conditions across key end-markets improved in FY26, with 2/3-wheeler and truck and bus sales increasing by ~30% and ~61%, respectively, while tractor sales remained broadly flat, declining by ~1%. Against this backdrop, STPL’s topline increased by ~14.6% on an annualized basis to ~PKR 29.0bln in 6MCY26, following ~9.4% growth to ~PKR 50.6bln in CY25. Revenue remains concentrated in tyres (~93%), led by motorcycle and three-wheeler tyres, while exports declined by ~12% in 6MCY26 to ~11% of revenue. Capacity utilization was ~74.4% for tyres and ~82.7% for tubes in CY25. Profitability improved, with gross margin at ~22.5% in 6MCY26 (CY25: ~19.4%) and net margin at ~12.5% (CY25: ~8.7%), supported also by lower finance cost and a higher share of profit from its associate, Service Long March Tyres Limited. The Company’s financial risk profile is demonstrated by adequate working capital management, cash cycle, and strong coverages. Capital structure remains leveraged, comprising a mix of long-term and short-term borrowings. A significant portion of the debt is in the form of short-term facilities, primarily utilized to fund working capital requirements. The Positive outlook reflects the Company’s sustained market position, continued growth, improving profitability and debt servicing capacity, and declining leverage. It also incorporates expectations that the planned wholly owned subsidiary will support product diversification and broaden the Company’s market reach. Assigned ratings also incorporate strong business acumen of sponsors complemented by sound governance practices, oversight from experienced professionals in key positions, and a comprehensive internal control framework.
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The ratings are dependent on the sustenance of the Company’s position in the domestic tyre industry and consistent growth with improvement in profitability. Prudent working capital management, sustained cash flow generation, a lower reliance on short-term borrowings, and execution of planned expansion within its financing framework shall remain imperative.

About the Entity
Service Tyres (Private) Limited (‘STPL’ or ‘the Company’) was incorporated in Pakistan on December 21st, 2023 as a private limited company. It is primarily engaged in the manufacturing, trading, and sale of all types of tyres, tubes, spare parts, and allied products for bicycles, motorcycles, scooters, rickshaws, automobiles, buses, trucks, cars, tractors, trolleys, and other vehicles. The Company is a wholly-owned subsidiary of SIL. The board of STPL comprises five members, including Mr. Arif Saeed (CEO) and Mr. Omar Saeed (Director).