PACRA Assigns Initial Entity Ratings to Daewoo Pakistan Express Bus Service Limited

Daewoo Pakistan Express Bus Service Ltd. (‘DPEBSL’ or ‘the Company’) was established in 1997,, as an intercity bus transit company. Over the years, the Company has significantly expanded its footprint, emerging as one of the largest players in the sector, The Company now operates a fleet of ~370 buses, and 61 terminals, serving ~6mln passengers annually. To diversify the revenue streams, DPEBSL ventured into the logistics sector with the launch of ‘Daewoo Fastex’, which has since become the 3rd largest logistics services provider in Pakistan with ~200 delivery centers and a dedicated fleet of ~185 trucks. Additionally, the Company has also established a strong presence in the regulated business segment by securing operations and maintenance (O&M) contracts for several Mass Transit projects. The Company’s ratings reflect its well-defined ownership structure, and strong governance framework, supported by a professional management team. These factors, combined with consistent revenue growth and diversification, contribute to its solid financial standing and sustainable profitability. Pakistan’s intercity bus transit industry is characterized by a mix of a few large, organized players and many small, unorganized operators with limited reach. While competition in this segment is intense, particularly in terms of pricing and service quality, there is limited competition in the regulated mass transit space, where only a few players possess the capacity to manage and maintain such projects. DPEBSL holds a dominant market share of ~70%, having secured O&M contracts for 7 of the 10 mass transit projects currently operational in Pakistan. During 6MCY24, the Company’s revenue was recorded at PKR 12,271mln (CY23, PKR 23,253mln), reflecting an annualized growth of ~6%. The intercity bus and cargo segments accounted for ~52% of the total revenue, while the regulated business segment contributed ~48%. Price adjustment remained the primary driver of revenue growth during the past three years, as the customer base and occupancy rates have remained almost stagnant. However, there was a notable increase in volume within the relatively smaller cargo segment. The financial risk matrix of the Company is characterized by a lean working capital cycle, comfortable coverages, and a modestly leveraged capital structure, with borrowings being entirely long-term, and directed towards funding expansion. Going forward, the Company is well-positioned to capitalize on its already established strong standing in the regulated business segment. However, a focused medium-term strategy will be essential to foster volumetric growth in the intercity bus transit sector. Furthermore, the Company has entered into a joint venture agreement to participate in the bidding process for the proposed outsourcing of solid waste management services across various constituencies in Punjab. If awarded, this project could significantly enhance the Company’s financial profile.
The assigned ratings are contingent on the Company’s ability to sustain its revenue growth while maintaining a healthy profitability matrix. Adherence to strong financial discipline and ensuring that leverage remains at a manageable level shall also remain imperative for the sustainability of the ratings.

About the Entity
DPEBSL is an unlisted public limited company, incorporated on December 22, 1997, under the repealed Companies Ordinance, 1984 (Now the Companies Act, 2017). The Company owns and operates a fleet of vehicles for the transportation of passengers and cargo. Additionally, The Company is also engaged in the O&M of various mass transit projects across Pakistan. The majority ownership of the Company, with a 90.93% stake, is held by Liberty Daharki Power Ltd. which is ultimately owned by Mr. Shaheryar Arshad Chishti, through his wholly-owned companies.