Service Industries Limited ('SIL' or 'the Company') was incorporated in 1957 under the Companies Act, 1913 (now the Companies Act, 2017), converted into a public limited company on September 23, 1959, and listed on the Pakistan Stock Exchange (PSX) in June 1970. As of Aug'26, the Company's free float stood at ~50.0% of total shares. SIL occupies the position of the ultimate holding and operating platform within the Service Group, maintaining strategic investments , mainly in subsidiary entities across the tyre and footwear segments.

SIL traces its origins to the late 1930s in Lahore, where its founders, Ch. Muhammad Saeed, Ch. Nazar Muhammad and Ch. Mohammad Husain, began manufacturing and supplying mosquito nets, minor steel products and leather chappals, subsequently expanding into travel bags, handbags and holdalls made of canvas and leather. The Company was formally incorporated as a private limited entity in 1957. In 1954, SIL installed a shoe manufacturing plant in the Gulberg industrial area of Lahore, commencing large-scale footwear production, alongside the establishment of its first retail outlet on Mall Road, later rebranded as a dedicated Servis store. Expansion into Gujrat saw the development of one of Punjab's largest industrial complexes, encompassing leather and canvas footwear, canvas fabric, and eventually bicycle tyres and tubes. A significant milestone was the formation of Service Long March Tyres Limited, a joint venture with a Chinese technology partner, positioning SIL as the only local manufacturer of Truck and Bus Radial (TBR) tyres. More recently, the Group executed a structured demerger, transferring its tyre and tube operations to STPL and its retail footwear business to SRPL, reinforcing SIL's role as the Group's strategic holding platform while enabling specialized management oversight of each business line.

SIL directly manages its footwear manufacturing facility in Gujrat, while its tyre/tube, retail and export operations are conducted through subsidiaries and the SLM joint venture. At the consolidated Group level, installed footwear capacity stands at ~4.6mln pairs under Strobel construction and ~3.6mln pairs under lasted construction, supported by a nationwide retail network of 286 outlets operated through SRPL. In the tyre segment, STPL maintains an annual installed capacity of ~23mln tyres and 57mln tubes, complemented by a spare-parts division (chains and sprockets); SLM's TBR capacity has been expanded from 1.3mln to 2mln with a dedicated Passenger Car Radial (PCR) facility under development (commercial operations targeted January 2028; initial capacity of 2mln tyres). Capacity utilization as of CY25 stood at ~75% in footwear, ~75% in tyres and ~83% in tubes. The Group's supply chain draws on natural rubber, synthetic rubber, carbon black, steel cord, nylon fabric and leather, procured through a mix of domestic and import channels.

The sponsoring family remains the principal shareholder and ultimate decision-making authority of SIL. As per the shareholding pattern as of Aug’26, Directors, the CEO and the sponsoring families collectively held ~50.47%, associated companies/undertakings/related parties ~5.27%, NIT & ICP ~10.05%, and the general public (local and foreign) ~34.21%, with the residual spread across banks, DFIs, insurance companies, modarabas and mutual funds. As of Aug'26, the Company's top-five shareholders were:

Key individual sponsor holdings are led by Mr. Hassan Javed (~19.29%), followed by Mr. Omer Saeed and Mr. Arif Saeed (~10.14% each), Ms. Shereen Hassan (~0.85%) and Ms. Fatima Saeed (~0.79%). Notably, Mr. Shahid Malik, a recently inducted non-executive director, is a >5% shareholder in his individual capacity, though not a member of the sponsoring family or an executive of the Company.

The ownership structure of SIL is considered stable, anchored by the sponsoring family’s significant combined shareholding and continuous, active leadership across both the holding company and its subsidiaries. With a corporate history spanning over seven decades, SIL has maintained consistent ownership without material disputes or involuntary ownership transitions. A clear succession framework within the founding family, combined with the Group's expanding institutional profile, including SLM’s PSX listing, which introduces a broader external shareholder base at the subsidiary level, further reinforces structural ownership stability and strategic continuity.

The sponsors of SIL demonstrate substantive business acumen, anchored by decades of hands-on engagement across the footwear and tyre sectors. Strategic foresight is evidenced by the formation of the SLM joint venture with a Chinese technology partner, the establishment of SGFL for export-oriented footwear manufacturing, the structured demerger that created specialized management platforms for each business vertical, and, most recently, the successful execution of SLM's oversubscribed PSX listing, which both crystallized value and broadened the Group's access to capital markets to fund its Passenger Car Radial expansion. The expansion of the Servis brand into a household name, alongside the Group's growing presence across international markets, reflects the sponsors' capacity to build both brand equity and operational scale.

SIL's consolidated asset base stood at ~PKR 136.8bln as of Dec'25 (Dec'24: ~PKR 110.6bln), with consolidated shareholders' equity of ~PKR 40.9bln (Dec'24: ~PKR 26.0bln), reflecting meaningful capital accretion during the year. As of Mar'26, consolidated assets moderated to ~PKR 122.4bln, largely reflecting the redemption of short-term mutual fund placements and an active paydown of short-term borrowings, while equity rose further to ~PKR 45.9bln. Beyond the consolidated balance sheet, the Group holds substantial strategic investments in SLM and SGFL, which, following SLM’s PSX listing, now carry an observable market value that provides additional financial depth and flexibility beyond book value.

The Board of Directors of SIL comprises nine members, reflecting a balanced mix of three independent directors, one executive director, and five non-executive directors, with the Chairman and CEO roles held by separate individuals. As of Aug'26, the Board comprises:

The Board underwent a refresh during the review period, with Mr. Shahid Malik and Mr. Muhammad Asad inducted as non-executive directors in place of the previous cohort, broadening the Board's capital-markets, pharmaceutical/FMCG and asset-management expertise alongside its existing base in regulatory affairs, industrial operations and financial leadership.

The Board is chaired by Mr. Hassan Javed, who has also served as CEO of Service Global Footwear, and has chaired the Pakistan Footwear Manufacturers Association and GESCO. Mr. Arif Saeed (CEO) has served as Chairman of Service Global Footwear, the Engineering Development Board, and founding Chairman of major public-sector power companies, in addition to leading APTMA and the Lahore Stock Exchange. Mr. Omar Saeed, previously CEO of SIL (2011–2018), currently serves as CEO of Service Long March Tyres and Servis Foundation, and sits on the boards of Nestlé Pakistan, Systems Limited and Service Global Footwear, also he is the Chairman of Export Development Fund (EDF). Mr. Ahsan Bashir has served as CEO of Suraj Cotton Mills since 1992 and has chaired APTMA. Mr. Muhammad Naeem Khan has served as CEO/MD of Atlas Asset Management, Atlas Investment Bank and Atlas Capital Markets, and currently sits on the boards of Atlas Power and Raaziq International. Mr. Shahid Malik is Group Managing Director of Hilton Pharma (Pvt.) Limited and CEO of Hinucon (Pvt.) Limited, has driven that Group's diversification and international expansion, sits on the boards of Packages Limited and Thal Limited, and holds a degree in Economics & Finance from NYU Stern with executive education from INSEAD, London Business School and IMD. Mr. Muhammad Asad joined National Investment Trust Limited (NITL) as Managing Director in July 2026 for a three-year term, having previously served for 25 years at Al Meezan Investment Management (latterly as Chief Investment Officer, managing funds exceeding ~PKR 700bln), and holds an MBA from IBA, Karachi.

The Board meets regularly with structured agendas to steer strategic direction and monitor management performance, with comprehensive minutes maintained. Two formal subcommittees support oversight: the Audit Committee and the HR & Remuneration Committee, each comprising three members. The Audit Committee oversees financial reporting integrity, internal controls and related-party transactions, while the HR & Remuneration Committee aligns management compensation with performance objectives; the Board's oversight is further reinforced through quarterly reviews of the control environment and internal audit findings.

SIL's external audit is conducted by M/s Riaz Ahmad & Co., Chartered Accountants, a category 'A' firm on the SBP panel of auditors. The auditors expressed an unqualified opinion on the standalone financial statements for the year ended December 31, 2025, reflecting compliance with applicable reporting standards and sound financial disclosure practices.

SIL is structured into multiple operational entities, each overseen by specialized management teams tailored to their respective functions. Clear reporting lines, defined roles, and accountability mechanisms ensure operational efficiency and effective oversight. The Group also benefits from the stability of having all key positions filled, with senior management experienced in leading both domestic operations and international ventures. This structure reflects a professionalized governance model that enables SIL to balance its role as a holding company with its operating responsibilities.

The management team is led by Mr. Arif Saeed, CEO, with 29 years of overall experience. He is supported by Mr. Babar Ali Khan, Chief Financial Officer (Chartered Accountant, 21 years' experience). Other senior team members include specialists in finance, technical operations, human resources, sales, and marketing, many of whom have long tenures with SIL, ensuring both continuity and depth of expertise. The mix of family leadership and professional managers provides a well-rounded foundation for strategic execution.

Management has demonstrated consistent execution of strategic priorities, including completion of SLM's second manufacturing phase, its subsequent PSX listing, and the operationalization of STPL and SRPL following the demerger. In the retail segment, management is actively rebalancing the product mix: a cosmetics category and a standalone apparel retail concept, and e-commerce has emerged as a growing, comparatively higher-margin channel. The Group Executive Committee, Business Head Committee and Core Services Committee collectively bridge interdepartmental gaps and align operational priorities with strategic objectives, with minutes properly recorded and reviewed, reflecting a culture of structured accountability.

SIL has fully deployed an Enterprise Resource Planning system through Oracle E-Business Suite (EBS) Release 12, integrating financing, manufacturing and support functions on a centralized data platform, enabling process standardization, real-time information flow and informed, timely decision-making at both Group and subsidiary level.

SIL maintains a sound internal control framework supported by clearly defined lines of responsibility, authorization and accountability. A dedicated internal audit function, staffed with qualified professionals, evaluates internal controls and reports to the Board's Audit Committee, which reviews the adequacy of the control environment on a quarterly basis, reinforced by robust technological infrastructure across manufacturing and support functions.

Pakistan's tyre and footwear industries together constitute a significant component of the manufacturing sector, closely linked to consumer spending, mobility infrastructure and export competitiveness. In the tyre segment, the domestic market was estimated at ~USD 2.09bln in 2025, projected to grow to ~USD 2.71bln by 2030 (~5.32% CAGR); volumetrically, the market recorded ~26.0mln units in 2025, with projections indicating growth toward ~37.0mln units by 2034. The replacement market dominates demand, typically accounting for 80–90% of total offtake, providing structural demand stability relative to purely OEM-dependent markets; the two/three-wheeler segment remains the single largest vehicle category on affordability and urban-mobility grounds. Demand from the commercial vehicle segment continues to expand, driven by CPEC-linked freight-corridor growth and gradual normalization of light-vehicle production; within the TBR category specifically, demand is supported by regulatory localization policy and import substitution. The agricultural tyre segment saw near-term softness, with tractor sales in FY25 declining ~37% YoY to ~29,000 units (FY24: ~45,911 units), reflecting rural income and mechanization-uptake pressures, though recovery is expected to track agricultural commodity prices and government support. On the competitive landscape, domestic manufacturers General Tyre and Rubber Company (GTYR) and Panther Tyres compete alongside SIL's tyre platforms, while grey-market imports, estimated by management at ~20–25% of the domestic replacement market (having displaced a historical ~70% share held by legacy international brands), continue to pose structural competition; industry replacement capacity is estimated at ~6.5mln tyres, with GTR and Armstrong each holding ~1.5mln units of capacity, and management expects further consolidation around a smaller set of established players (GTR, Armstrong, Long March) as vehicle categories, including the emerging EV segment, evolve. Key sector-wide credit risks include exposure to volatile petrochemical-derived raw material prices (synthetic rubber, carbon black), currency depreciation risk on import-dependent inputs, macro/auto-cycle cyclicality, persistent grey-market competition, and technology-obsolescence risk as radial adoption accelerates relative to bias tyres. In footwear, Pakistan's industry employs over one million people, with the bulk of domestic demand met by the cottage industry and the organized segment served by a small number of large-scale players (BATA, Servis, STYLO, NDURE, BORJAN). On the export side, national footwear exports reached ~USD 176.5mln in FY25 (+8.9% YoY, reversing FY24's ~9.2% decline). Momentum has continued into FY26: exports for the first eight months (Jul'25–Feb'26) reached ~USD 131.75mln, up ~4.23% YoY, with leather footwear, which continues to dominate export revenue, down a modest ~1.5% while 'other footwear' categories expanded ~29.7%, indicating a broadening export product mix; February 2026 alone recorded ~8.9% YoY growth. Key sector credit risks include dependence on imported leather and synthetic materials (creating FX exposure), intense informal-sector price competition, sensitivity to European and US demand conditions, export-market compliance requirements around sustainability and ethical sourcing, and labor-cost inflation in a labor-intensive industry. Across both sectors, the macroeconomic backdrop has turned somewhat less accommodative through 2026: after easing to a low of ~10.5% earlier in the year, the State Bank of Pakistan's policy rate was raised back to 11.5% by mid-2026 and held through its July meeting, with headline inflation running in the ~11% range, still well above the SBP's 5–7% medium-term target, which, together with currency volatility, remains a structural challenge for both import-dependent manufacturing and consumer-facing demand. ESG and climate-related considerations are gaining traction, particularly for export-oriented manufacturers subject to buyer sustainability requirements in developed markets.

The Service Group occupies a leadership position across Pakistan's tyre, tube and footwear sectors. STPL holds a dominant share of the two/three-wheeler, LCV (bias) and agricultural tyre categories, while SLM is the sole domestic manufacturer of TBR tyres, a structurally unique position reinforced by import-substitution policy and now underpinned by capital-market validation following its PSX listing in June 2026. SLM's TBR capacity has been expanded from 1.3mln to 2mln, and IPO proceeds are earmarked for a new Passenger Car Radial (PCR) facility, a segment historically reliant on imports, targeting commercial operations from January 2028, a meaningful extension of the Group’s import-substitution franchise. In footwear, SRPL and the Servis brand rank among the top five organized retail players. On exports, SGFL leads Pakistan's leather footwear export market. Within the domestic tyre market (including SLM and GTR), SLM holds the largest share, followed by STPL, Panther, General, Diamond, and Ghauri. On exports, SLM leads, followed by STPL. The Group's installed capacity, ~24.5mln tyres, 57mln tubes and ~8.2mln pairs of footwear across construction methods, provides meaningful scale advantages over most domestic peers, reinforced by seven decades of Servis brand equity, a 286-outlet nationwide retail network.

Consolidated revenue for the year ended Dec'25 grew ~18.7% to PKR 148.4bln (CY24: PKR 125.0bln), moderating from ~29.5% growth recorded in CY24, supported by higher tyre and tube volumes and improved price realization. Revenue composition has shifted materially toward the tyre and tube segment, which contributed ~71% of consolidated turnover in CY25, against ~26% for footwear and ~3% for spare parts and technical products. This concentration deepened further in 1QCY26: consolidated revenue rose ~30% YoY to PKR 42.2bln, driven by the tyre segment (+45% YoY to PKR 31.4bln), whose share of consolidated topline rose further to ~74% (1QCY25: ~67%), while footwear was broadly flat (-1% YoY to PKR 9.8bln). The revenue base retains adequate product and geographic diversification via SLM, STPL and SGFL's export channels, but the rising and now dominant weight of the tyre segment, and within it, SLM specifically, introduces a growing degree of segment concentration risk, one that is partially mitigated by the structural stability of replacement-driven tyre demand and by SLM's own diversification into the PCR category.

For CY25, gross margin moderated to 23.6% (CY24: 24.7%), reflecting evolving raw material cost dynamics, natural rubber, synthetic rubber, carbon black, steel cord and leather represent the largest components of cost of sales and are sourced through a mix of domestic and import channels, creating exposure to global commodity cycles and currency movements. Operating margin eased to 13.1% (CY24: 14.4%) on the cost of expanded operations and network growth, while net profit margin improved materially to 10.2% (CY24: 6.3%), aided by a sharp decline in the average borrowing rate to 7.8% (CY24: 12.1%) and a net positive taxation impact of PKR 1.0bln (CY24: a charge of PKR 3.4bln). Momentum carried into 1QCY26, with gross margin expanding to 27.1% and net margin to 12.0% as the average borrowing rate fell further to 5.8%.

The Group’s long-term sustainability rests on several structural pillars. In the tyre segment, SLM's position as the sole domestic TBR manufacturer provides a durable competitive moat, now reinforced by direct capital-market access following its PSX listing: IPO proceeds are earmarked for a dedicated Passenger Car Radial facility (commercial operations targeted January 2028), extending the Group’s import-substitution franchise into a segment historically reliant on imports, and reducing SLM's reliance on Group-level financial support to fund this expansion. In footwear, SRPL's 286-outlet network has plateaued, periodic openings broadly offsetting closures, prompting management to pursue a more active mix-management strategy and scaling e-commerce as a newer, comparatively higher-margin channel, while SGFL sustains its leadership of Pakistan's leather footwear export market. ESG exposure is an increasingly material consideration for both segments given buyer-driven sustainability and ethical-sourcing requirements in European and US export markets. The Group's capital expenditure program, encompassing SLM's PCR project and continued maintenance capex across large-scale manufacturing facilities, is funded through a combination of concessionary (including TERF-linked) financing, IPO proceeds at the SLM level, and internal cash generation. The Group's track record of consistent revenue and profit growth through macroeconomically challenging phases of high inflation and elevated interest rates continues to demonstrate execution resilience.

Gross working capital days stood at 101 days for both Dec'25 and Dec'24, indicating a stable inventory and receivables cycle; net working capital days were similarly stable at 80 days (CY24: 79 days). The current ratio as of Dec'25 was 3.5x, unchanged from Dec'24. Trade receivables rose to PKR 17.0bln as of Dec'25 (Dec'24: PKR 14.1bln) and inventories to PKR 26.5bln (Dec'24: PKR 24.5bln), consistent with higher sales volumes, while trade payables were broadly stable at PKR 8.7bln (Dec'24: PKR 8.5bln). Working capital is funded through a combination of internal cash flows and short-term borrowings. As of Mar'26, gross and net working capital days moderated to 97 and 76 days respectively, the current ratio stood at 3.2x, trade receivables rose to PKR 23.0bln, inventories eased to PKR 22.9bln, and trade payables rose to PKR 10.2bln.

For CY25, Net cashflow from operating activities before working capital changes was PKR 15.5bln (CY24: PKR 12.8bln); after working capital movements (a net absorption of PKR 2.1bln in CY25 versus PKR 6.6bln in CY24), net operating cash flow rose to PKR 13.4bln (CY24: PKR 6.2bln), reflecting both higher profitability and a less adverse working-capital swing. The EBITDA-to-finance-cost ratio improved to 4.6x in CY25 (CY24: 3.1x) on the back of lower total finance cost; the core coverage ratio improved to 2.0x (CY24: 1.7x); and the debt payback ratio improved to 1.5x (CY24: 2.0x), indicating a strengthened capacity to retire debt from operating cash flows. Coverage metrics improved further in 1QCY26: the EBITDA-to-finance-cost ratio reached 8.6x, the core coverage ratio strengthened to 3.5x, and the debt payback ratio improved to 0.9x, driven by the sharply reduced average borrowing rate and sustained operating cash generation.

Total borrowings rose to PKR 78.2bln as of Dec'25 (Dec'24: PKR 66.6bln), an increase of ~PKR 11.6bln; however, this was more than offset by growth in shareholders' equity to PKR 40.9bln (Dec'24: PKR 26.0bln), driven by retained earnings and profitability. Consequently, the leveraging ratio improved to 65.6% as of Dec'25 from 71.9% at Dec'24. The deleveraging trend strengthened further in 1QCY26: total borrowings declined ~29% to PKR 55.7bln (largely reflecting a paydown of short-term financing), while equity rose further to PKR 45.9bln, bringing the leveraging ratio down to 54.8%, the lowest level across the Dec'23–Mar'26 analytical window. The average borrowing rate fell to 5.8% in 1QCY26 (CY25: 7.8%), though the SBP's policy rate has since been raised back to 11.5% by Aug'26 (from a low of ~10.5% earlier in the year), an emerging headwind to financing costs for the remainder of CY26 despite the Company's preferential banking terms. Going forward, leverage remains sensitive to the Group’s expansion plans, including the incorporation of Service Tyres International (Pvt.) Limited under Service Tyres (Pvt.) Limited and, particularly, SLM’s PCR capacity build-out and broader capex program. However, pressure on SIL’s consolidated balance sheet is partly mitigated by SLM’s PSX IPO proceeds, which are expected to fund a portion of the planned capex at the subsidiary level, alongside continued access to TERF-linked concessionary financing, reducing reliance on conventional short-term debt. Nevertheless, the scale and pace of the planned investments could result in a gradual increase in debt levels over the medium term.