PACRA Assigns Initial Ratings to Service Tyres (Pvt.) Limited

Service Tyres (Private) Limited, a wholly owned subsidiary of Service Industries Limited (SIL), is a leader and prominent brand in Pakistan’s tyre industry. With over three decades of presence in the tyre industry, Servis Tyres has built a sustained track record of operational excellence and brand recognition. Its product portfolio spans 2/3-wheeler, ULT, and agricultural tyres, as well as tubes and auto spare parts, catering to both OEM and replacement markets. The Company retains a dominant position in the two- and three-wheeler and light commercial vehicle bias tyre categories. STPL benefits from strong brand equity and an extensive distribution network, spanning both nationwide and abroad. In addition, the Company sustains a strong presence in export markets, complementing its established leadership in the local industry. The Company efficiently operates a modern state- of-the-art production facility in Gujrat, enabling it to serve both domestic and export markets. The broader macroeconomic environment in FY25 reflected signs of recovery, with GDP growth recorded at 2.68%, supported by an improved industrial and services sector, declining inflation, lower policy rates, and relative stability in the foreign exchange, which contributed to stronger consumer confidence. According to the latest data released by Pakistan Bureau of Statistics (PBS), the Large-Scale Manufacturing (LSM) index reported robust growth within the transport sector, with automobile production expanding by 46.2% and other transportation equipment increasing by 36.6%. Against this backdrop, STPL’s topline grew by ~12.1% year-over-year in 1HCY25, reaching PKR 25.940bln compared to PKR 46.284bln in CY24, majorly driven by higher volumes and price adjustments. Capacity utilization remained adequate at ~66.5% for tyres and ~75.7% for tubes in CY24, reflecting sound operational execution. Profitability margins remained broadly stable, as modest increases in COGS were offset by reductions in operating and finance expenses. Financial risk profile is demonstrated by adequate working capital management, cash cycle, and modest coverages. Capital structure remains leveraged, comprising a mix of long-term and short-term borrowings. A significant portion of the debt is in the form of short-term facilities, primarily utilized to fund working capital requirements. Assigned ratings incorporate strong business acumen of sponsors complemented by sound governance practices, oversight from experienced professionals in key positions, and a comprehensive internal control framework.
The ratings are dependent on the sustenance of the Company’s leading position in the domestic tyre industry and consistent growth under a challenging business environment. Continued improvement in profitability metrics, prudent working capital management and robust cash flow generation shall remain imperative.

About the Entity
Service Tyres (Private) Limited (‘STPL’ or ‘the Company’) was incorporated in Pakistan on December 21st, 2023 as a private limited company. It is primarily engaged in the manufacturing, trading, and sale of all types of tyres, tubes, spare parts, and allied products for bicycles, motorcycles, scooters, rickshaws, automobiles, aircraft, buses, trucks, cars, tractors, trolleys, and other vehicles. The Company is a wholly-owned subsidiary of SIL. The board of STPL comprises five members, including Mr. Arif Saeed (CEO) and Mr. Omar Saeed (Director).