PACRA Revises Rating of Security & Management Services (Pvt.) Limited

The restructuring at the group level resulted in a consolidation of man guarding business with SMS. There is softening in the margins owing to intense competition in the man guarding industry. At the same time, the cost hike has not completely been passed on to clients, impacting current year profitability. The loss making man guarding segment of WPPL dominated the profitable high end contracts of SMS resulting in a negative bottom line for the company. The management is aiming the strategy to offload the loss making contracts and focus on high end profitable clients. Meanwhile, efforts are underway to revise contract pricing upward. The company’s efforts to capitalize on the Pathfinder Group's vision of offering a comprehensive set of security solutions through its dedicated companies would add value.

The ratings of the company are dependent upon its ability to retain the high end profitable contracts. The company's ability to successfully revamp its business strategy to sustain pressure on margins of guarding business and generates profits remains important.

About the Entity
SMS, incorporated in Pakistan in 1987, currently employs around 6,500 security guards. The ownership of the company remains with Mr. Ikram Sehgal, who is the CEO and Chairman of the company, and his family. The extensive experience of Mr. Ikram Sehgal has provided SMS a competitive advantage. Col (Retd) Ashiq Hussain Malik is the COO of the company and is supported by an experienced team.

The inclusion of Mr. Zarrar Sehgal (Deputy Chairman), Ms. Kashmala Sehgal, Ms. Haya Sehgal and Ms. Nefer Sehgal has increased the board size to seven members. It is a family dominated board, comprising six members of sponsoring family. In order to benefit from a diverse perspective, the induction of independent directors on the board becomes important.