Service Industries retains 'AA' long-term rating, outlook stable

September 25, 2026 (MLN): The Pakistan Credit Rating Agency Limited (PACRA) has maintained the entity ratings of Service Industries Limited (PSX:SRVI) at 'AA' for the long term and 'A1+' for the short term, with a stable outlook, unchanged from the previous rating action a year earlier.

The action follows the previous rating maintained on September 19, 2025, with both the long-term and short-term ratings, as well as the outlook, kept intact.

SRVI sits at the apex of the Service Group as its ultimate holding company, while also operating as a manufacturing entity through its footwear facility in Gujrat.

The corporate structure comprises four wholly-owned subsidiaries, Service Tyres (Pvt.) Ltd (STPL) and Service Retail (Pvt.) Ltd (SRPL), along with SRVI Gulf FZE and Service Industries Capital (Private) Limited (SICPL), while the Company also holds investments in Service Global Footwear Ltd (SGFL) and Service Long March Tyres Limited (SLM).

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 progressing a dedicated Passenger Car Radial (%R) facility, with IPO proceeds earmarked for the project, extending the Group's import-substitution strategy into another major tyre category.

STPL separately retains a dominant share of the two- and three-wheeler and light commercial vehicle bias tyre categories, underpinning the Group's leadership across the tyre value chain, complemented by a continued build-out of the export portfolio, with SLM, STPL and SGFL together advancing exports to around 30% of consolidated sales in CY25.

In footwear, SRVI 's 286-outlet domestic retail 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.

Against a somewhat less accommodative macroeconomic backdrop in 2026, marked by the policy rate rising to 11.5% and inflation approaching 11%, SRVI 's consolidated revenue nonetheless grew around 18.7% in CY25 to Rs148.4bn from Rs125.0bn in CY24, with net margins improving materially on lower borrowing costs even as gross and operating margins moderated on raw material cost pressures.

The ratings incorporate SRVI 's improving financial risk profile, adequate working capital management and strengthening coverages, though the capital structure remains leveraged, reflecting continued use of concessionary, TERF-linked financing for expansion, including SLM's planned capacity build-out.

The ratings remain dependent on the sustenance of the Group's leading position in the tyre and footwear markets, successful execution and ramp-up of SLM's %R capacity without a material build-up in consolidated leverage, and continued growth in the export portfolio, along with profitability in line with business expansion and sustained dividend flow from the Group's strategic investments.

SRVI is a public listed entity incorporated in 1957, operating under the brand name 'Servis' across the country.

The majority stake vests with the Directors and sponsoring family, which collectively hold around 50.47% of shareholding.

The Board comprises nine members, including three independent directors, one executive director and five non-executive directors, with Mr Arif Saeed serving as CEO.

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