PACRA Maintains the Entity Ratings of Service Global Footwear Limited

Service Global Footwear Limited (‘SGFL’ or ‘the Company’) is a public limited company engaged in the manufacturing and marketing of footwear products. SGFL is a subsidiary of Service Industries Limited (SIL), a well-established group with over six decades of presence across multiple sectors, including footwear, tyres and tubes, and technical rubber products. The Company was established as an export-oriented platform to expand the Service Group’s international footprint by leveraging SIL’s deep-rooted expertise in the footwear segment. The assigned ratings draw comfort from the Group’s longstanding industry presence, supported by SGFL’s gradual emergence as a reliable footwear manufacturing partner for a growing base of global customers. During 2HFY25, the global trade environment remained challenging following the imposition of reciprocal tariffs, which increased the landed cost of Pakistani products and led to a realignment in global footwear sourcing. Within this backdrop, Pakistan’s reciprocal tariff of 19 percent remains relatively competitive compared to several regional peers, offering selective opportunities in mid-value footwear segments, subject to improvements in scale, compliance, and value addition. Pakistan’s footwear industry remains largely fragmented, with nearly 80% comprising unorganized players such as small-scale manufacturers and cobblers, while the remaining 20% consists of organized participants, including Servis. During FY25, Pakistan’s footwear exports recorded a recovery and reached USD 176mln, compared to USD 162mln in FY24 and USD 178mln in FY23, primarily supported by improved unit prices. Export volumes, however, declined by ~11% to 19mln pairs from 21.4mln pairs in FY24. Key export destinations include Germany, Italy, the Netherlands, the United States, and Spain. SGFL accounts for around 37.5% of the country’s footwear exports value wise, mainly supplying footwear, leather, and allied products to various international brands. The Company has strengthened its outreach in Europe and is actively pursuing client diversification in the United States and other markets. In 9MCY25, SGFL posted topline growth of ~16.4% on an annualized basis, with nearly 99% of revenues derived from export sales. Growth was driven by improvements in both sales volumes and price realizations. Higher and sustained capacity utilization supported better cost absorption, while ongoing efficiency initiatives led to margin improvement across all levels. The Company’s financial risk profile reflects adequate working capital management, sufficient cash flow generation, and improved coverage indicators. While the capital structure remains leveraged, a significant portion of borrowings comprises short-term facilities availed under export refinance and export finance schemes. The assigned ratings also factor in strong business acumen of sponsors, reinforced by sound governance practices and a comprehensive internal control framework. Additionally, ratings benefit from the material contribution to profitability from SGFL’s associated entity, Service Long March Tyres (Pvt.) Limited, which provides an additional income stream. Going forward, SGFL aims to enhance value creation through continuous process improvements, sustainable supply chain development, broader design offerings, and the adoption of innovative technologies. The ratings incorporate SGFL’s profitability profile and growth outlook in line with management’s financial projections and planned expansion initiatives.
The ratings are dependent on the sustenance of the Company’s leading share in its respective niche and consistent growth amid a changing environment. Prudent financial management and an effective liquidity profile shall remain imperative.

About the Entity
SGFL was incorporated as a Public Limited Company on July 19th, 2019. On April 28th, 2021, the Company got the PSX listing. The principal activities are manufacturing, sale, marketing, import & export of footwear, leather & allied products. The major stake (~75%) rests with SIL, followed by the general public (~23.8%), & individual from sponsoring family (~1.2%). SGFL's board comprises nine members including Mr. Arif Saeed (Chairman) & Mr. Hassan Javed (CEO).