PACRA Maintains the Entity Ratings of Service Industries Limited

Service Industries Limited (‘SIL’ or ‘the Company’) sits at the apex of the Service Group as its ultimate holding company, while also functioning as an operating entity through its footwear manufacturing facility in Gujrat. The corporate structure comprises four wholly-owned subsidiaries, Service Tyres (Pvt.) Ltd (STPL) and Service Retail (Pvt.) Ltd (SRPL), SIL Gulf FZE and Service Industries Capital (Private) Limited (SICPL). STPL house the tyre/tube while SRPL deals footwear-retail operations following a structured demerger. SIL also have investment in Service Global Footwear Ltd (SGFL) and Service Long March Tyres Limited (SLM). The Group’s corporatization journey gained further momentum with SLM’s transition to a PSX-listed entity, strengthening transparency and governance, while SIL’s multi-entity investment portfolio continues to provide a broader and more resilient business base. The assigned ratings reflect the Group’s consistently strengthening position in the domestic tyre market, supported by a strategy of identifying market gaps and developing local manufacturing capabilities in segments historically reliant on imports. SLM, already the sole domestic manufacturer of Truck and Bus Radial (TBR) tyres, is now progressing a dedicated Passenger Car Radial (PCR) facility, with IPO proceeds earmarked for the project. This follows the Group’s successful entry into TBR and extends its import-substitution strategy into another major tyre category, with potential to deepen its domestic market position as local production scales up. STPL separately retains a dominant share of the two- and three-wheeler and light commercial vehicle bias tyre categories, underpinning the Group’s overall leadership across the tyre value chain. This is complemented by a continued build-out of the Group’s export portfolio, with SLM, STPL and SGFL together advancing exports to ~30% of consolidated sales in CY25, broadening the revenue base while providing a partial hedge against the Group’s import-linked raw material cost base. In footwear, on the domestic retail side, SIL's 286-outlet network has plateaued, with periodic openings offset by closures, as the Company focuses on product-mix diversification and a growing e-commerce channel, while SGFL, the Group’s export-oriented manufacturing arm, continues to lead Pakistan’s leather footwear export market. A sound governance framework and prudent risk management practices at Group level continue to underpin the ratings. Against a somewhat less accommodative macroeconomic backdrop in 2026, marked by the policy rate rising to 11.5% and inflation approaching 11%, SIL’s consolidated revenue nonetheless grew ~18.7% in CY25 to PKR 148.4bln (CY24: PKR 125.0bln), with net margins improving materially on lower borrowing costs even as gross and operating margins moderated on raw material cost pressures. The ratings incorporate SIL’s improving financial risk profile, adequate working capital management and strengthening coverages. The capital structure remains leveraged, reflecting continued use of concessionary, TERF-linked financing for expansion, including SLM’s planned capacity build-out. Going forward, the sponsors remain committed to enhancing revenue through import substitution and broader export opportunities, while investing in capacity expansion and export-market development to sustain long-term growth.
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The ratings are dependent on the sustenance of the Group’s leading position in the tyre and footwear markets, successful execution and ramp-up of SLM’s PCR capacity without a material build-up in consolidated leverage, and continued growth in the export portfolio. Profitability in line with business expansion, prudent working capital management, and maintenance of coverages shall remain imperative, along with sustained dividend flow from the Group’s strategic investments.

About the Entity
SIL is a public listed entity, incorporated in 1957. The Company operates under the brand name of ‘Servis’ across the country. The Group is one of the largest manufacturers of tyres & tubes, and footwear, besides being a prominent export player in the country. The majority stake vests with Directors and the sponsoring family, which collectively holds ~50.47% of shareholding. The Board comprises nine members, with 3 independent directors, 1 executive director and 5 non-executive directors. Mr. Arif Saeed is the CEO of the Company.