PACRA Maintains Entity Ratings of Pakistan Services Limited

The hospitality sector, after enduring years of pandemic-induced disruptions, continues to recover gradually; however, the pace of normalization remains uneven. Elevated financial costs, inflationary pressures, and subdued foreign tourism have weighed on the sector’s profitability. Entities with high financial leverage remain particularly vulnerable due to persistent cash flow mismatches and elevated debt servicing burdens. Pakistan Services Limited (Hereinafter referred to as ‘PSL’ or the 'Company’), operating under the ‘Pearl Continental’ brand, has experienced a prolonged strain in aligning its operational cash flows with financial obligations. Despite possessing a sizable asset base, the Company continues to face challenges in meeting its debt commitments. To reduce its debt exposure, PSL had previously undertaken a divestment program of select non-core assets, through which a significant portion of its debt was repaid. Out of the total long-term facilities of PKR ~15.3bln, PSL has so far repaid PKR ~8.5bln in principal along with PKR ~10.4bln in interest, aggregating to PKR ~18.9bln. The current outstanding principal stands at PKR ~6.8bln, which includes a Sukuk instrument of PKR ~4.5bln. The Company’s non-current assets, valued at PKR ~55.5bln as of 9MFY25, continue to provide substantial coverage against its debt obligations. In light of ongoing liquidity constraints, PSL had engaged Bridge Factor as its financial advisor last year to lead a comprehensive debt restructuring plan. However, negotiations with lenders have not reached a conclusive stage, and the planned asset sales remain pending. Consequently, the Company’s debt position remains largely unchanged, and the overall recovery outlook continues to hinge on the successful execution of the restructuring strategy. During the year, a change in management was observed, coinciding with a shift in ownership structure. Subsequent to year-end FY25, and as per notices issued on the Pakistan Stock Exchange, AKD Group Holdings (Private) Limited, along with its subsidiary AKD Securities Limited, acquired a ~27.95% shareholding in the Company on July 14, 2025. The following day, July 15, 2025, Mr. Dawood Jan Mohammad acquired ~28% of the Company’s voting shares, while on October 14, 2025, Thatta Cement Company Limited also acquired a stake of ~28%. These transactions reflect a significant reconfiguration of the Company’s ownership landscape, and its impact on the governance cannot be determined at this stage. The Company has also filed for an extension for submission of its annual audited financial statements for FY25 till the end of November 2025. Operationally, the Company’s performance has exhibited improvement, supported by a recovery in occupancy rates and better average room tariffs. During 9MFY25, revenue grew by ~14.7% to PKR ~12.94bln, while profitability strengthened with a net profit of PKR ~929mln, compared to a full-year profit of PKR ~425mln in FY24. The performance uptick reflects partial recovery of the domestic hospitality market and effective cost rationalization measures.
Going forward, ratings will depend on the successful restructuring of the long-term debt and Sukuk, sufficient liquidity for timely repayment of obligations, and improved coverage. Additionally, resolving the material uncertainty regarding the Company's going concern status, as documented by external auditors, is considered important.

About the Entity
Pakistan Services Limited was established in 1958 and is quoted on the Pakistan Stock Exchange. It owns and operates Pearl Continental Hotels – the largest hotel chain in the country with 1,200+ rooms. Subsequent to the period ending March 24, Mr. Murtaza Hashwani resigned from the position of CEO, and Mr. Bastien Paul was appointed as the CEO by the board of directors. He has more than two decades of experience within the hospitality industry.