Gujrat: The Pakistan Credit Rating Agency Limited (PACRA) has upgraded the entity ratings of Service Industries Limited (SIL), reflecting the company’s robust performance across its diversified operations and strategic restructuring. SIL, functioning as both a holding and an operating company, has recently restructured its business model, enhancing operational efficiencies and expanding its product range in both domestic and international markets.
According to The Pakistan Credit Rating Agency Limited, the upgrade comes in light of SIL’s strengthened holding company structure following its recent demerger, which involved transferring its tyre/tube and footwear retail businesses to wholly owned subsidiaries. This move is intended to boost management specialization across its segments. As a holding entity, SIL has investments in various subsidiaries and maintains a significant influence over its operational companies which include Service Long March Tyres (Pvt.) Ltd and Service Global Footwear Ltd. The operating focus is now squarely on its Gujrat-based footwear manufacturing facility.
The ratings also reflect SIL’s leading market presence in its sectors, an established investment portfolio, and expanding export operations which have collectively fostered a 41% growth in consolidated revenue to PKR 61 billion in the first half of CY24 from PKR 43 billion in the same period last year. This growth is attributed to strategic pricing adjustments and volume increases despite macroeconomic challenges such as high inflation and energy costs impacting the larger scale manufacturing sector and consumer purchasing power in CY23.
Further supporting the ratings upgrade are SIL’s governance practices and risk management capabilities, which have played a crucial role in navigating operational challenges. The company also plans to continue its market expansion by opening new retail shops and enhancing its product offerings in the local market. In the export domain, SIL aims to bolster its international footprint, leveraging its subsidiaries’ capacities to substitute imports and meet global demand.
SIL’s financial strategy includes managing a leveraged capital structure with concessionary debt, aimed at funding expansion while maintaining prudent working capital management to ensure profitability and coverages in line with its growth trajectory. The ratings hinge on the company’s ability to maintain its market lead and achieve consistent growth amidst ongoing economic pressures.