Karachi: Secure Logistics Group Limited (SLG), a key player in integrated logistics, asset tracking, and security services, has maintained its entity ratings at ‘A+’ for long-term and ‘A1’ for short-term, reflecting a stable financial outlook. These ratings have been reaffirmed by the Pakistan Credit Rating Agency Limited (PACRA) following SLG’s successful debt reduction and significant business expansions, including its recent merger plans with Trax Online Pvt. Ltd.
According to The Pakistan Credit Rating Agency Limited, SLG has made substantial progress in the fiscal year 2024 by significantly reducing its balance sheet debt and upgrading its commercial fleet. Additionally, the company is expanding its logistical services to regional markets through a Transports Internationaux Routiers (TIR) license, aiming to capitalize on emerging regional opportunities.
The company has also invested in its IT infrastructure and is developing a B2B third-party marketplace, alongside expanding its distribution segment with the addition of new vehicles. These strategic moves are supported by a strong corporate governance framework and a board comprising individuals with extensive and diverse experience.
SLG’s recent announcement regarding its plan to merge Trax Online Pvt. Ltd. into its operations or one of its subsidiaries through a Scheme of Arrangement pending High Court approval, is a significant step towards enhancing its service offerings and market reach. The company aims to finalize this transaction by December 31, 2024.
PACRA’s ratings take comfort in SLG’s strategic objectives and ongoing value proposition, which are bolstered by its holding company structure and the support from its formidable ownership, comprising prominent local and international investors. During the first half of the fiscal year 2024, SLG reported a 14.4% growth in its top line, achieving PKR 1,027 million, aided by price inflation and increased capacity utilization that led to improved margins across all levels.
Despite challenges such as high inflation, rupee devaluation, and a highly fragmented logistics industry dominated by an unorganized segment, SLG is navigating these obstacles with a focus on innovation and efficiency enhancements. The expected stability in the Pakistani rupee, potential reductions in policy rates, and planned improvements to road infrastructure under the China-Pakistan Economic Corridor (CPEC) projects are seen as positive developments for the logistics sector.
SLG’s financial risk profile is considered robust, with comfortable coverage ratios, cash flows, and a working capital cycle. The company’s capital structure remains low-leveraged following substantial post-IPO debt repayments, with future expansions planned to be funded through internally generated cash flows.
The ratings are contingent upon SLG’s continuous improvement in its business profile and the successful implementation of its strategic business plans. Maintaining prudent financial performance, an effective liquidity profile, and financial discipline are crucial for sustaining these ratings.