Air Link Communication Limited ('Airlink' or 'the Company') is a public limited company, incorporated in January 2014 under the repealed Companies Ordinance 1984, now the Companies Act, 2017. The Company has been listed on the Pakistan Stock Exchange (PSX) since September 2021. Its registered office is at 152/1-M, Quaid-e-Azam Industrial Estate, Kot Lakhpat, Lahore. Airlink began as a partnership firm in 2010, engaged in the import and distribution of IT products, particularly mobile phones and related products. In 2014, a new private company was incorporated to take over the partnership's business, and the entire business was transferred to the Company’s books in 2018. Subsequently, Airlink converted its status to a Public Unlisted Company in April 2019 and was eventually listed on the PSX in September 2021. Airlink’s core operations comprise the production of Tecno smartphones and the distribution of mobile phones and allied products for several leading global brands, including Xiaomi, Samsung, iPhone, Tecno, and Itel. The Company has further strengthened its market position by partnering with Xiaomi, under which its wholly owned subsidiary, Select Technologies Limited (STL) manufactures and distributes Xiaomi mobile phones and accessories in Pakistan. STL’s manufacturing facility spans 120,000 sq. ft. of closed area, of which 60,000 sq. ft. is clean-room space, and has an annual capacity of ~2.7million units on a single-shift basis. In 9MFY26, the Group Company assembled around 1.6 million devices (FY25: ~2.8 million units), reflecting a capacity utilization rate of ~46.05% (FY25: ~62.49%). Airlink is currently developing a new state-of-the-art manufacturing complex within the Sundar Green Special Economic Zone (SGSEZ) in Lahore, which is nearing completion. The project covers eight acres, with three acres owned by Airlink and five acres by STL, and includes 1.4mln sq. ft. of purpose-built infrastructure. The facility will incorporate a 1 MW solar power system, expected to reduce production costs, improve energy efficiency, and support long-term sustainability objectives. Operating within the SGSEZ framework will provide the Company with ten years of fiscal incentives, enhancing cost competitiveness and supporting future growth. Aligned with its broader strategic vision, the new facility is designed to enable the export of mobile phones, laptops, LED TVs, electronics, home appliances, and other high-tech products for international brands. This expansion underscores Airlink’s growing role in strengthening Pakistan’s manufacturing and export base.

The majority stake rests with the members of the sponsoring family, holding ~73.43% of shares. Additionally, ~12.93% is owned by the general public, ~0.06% is held by foreign companies, ~8.38% is held cumulatively by banks, development finance institutions, non-banking finance institutions, insurance companies, modarabas and mutual funds, ~2.27% is held by directors, their spouses and minor children, whereas the remaining ~2.93% is owned by others. The ownership structure of Airlink is considered stable, given the significant majority stake held by the sponsoring family. No major changes in the ownership structure are anticipated in the near future. Mr. Muzzaffar Hayat Piracha, the primary sponsor, has led the Company since its inception. With extensive industry experience and a deep understanding of the market, his strong leadership is evident through the successful strategic partnerships the Company has established. His business acumen is highly regarded. The owners of the Company do not hold any strategic stakes in other companies. However, Mr. Muzzaffar Hayat owns commercial and residential real estate, contributing to the overall financial strength, which is deemed adequate.

The Board of Directors comprises seven members: two non-executive directors (including the chairman and a female director), two executive directors (including the CEO), and three independent directors. The Board members are seasoned professionals with extensive, multifunctional experience across multiple sectors. Mr. Aslam HayatPiracha, the Chairman, possesses over five decades of business experience with a core specialty in imports and exports. He is actively involved in overseeing Airlink's systems and controls. The independent directors are highly regarded business experts, bringing exposure from diverse sectors. The Board meets at least quarterly to oversee management's performance and ensure alignment with the Company’s strategic goals. In FY25, four Board meetings were held with strong attendance from the directors. Meeting minutes are appropriately documented, and action points are communicated to the relevant stakeholders. The Board has established two committees: the Audit Committee and the HR and Remuneration Committee, which enhance the Board's effectiveness by enabling focused oversight and efficient decision-making. M/S BDO Ebrahim & Co. Chartered Accountants, listed in the category 'A' on SBP's panel of auditors, serve as the Company's external auditors. They have expressed an unqualified opinion on the Company’s financial statements for the year ended June 30, 2025.

Airlink has a well-defined organizational structure, divided into eight functional departments: Human Resources, Production, Retail, Operations, Internal Audit, Marketing, Distribution, and Accounts & Finance. Each department is led by a professional Head who reports directly to the CEO. Currently, all key positions are filled. Mr. Muzaffar Hayat Piracha, the CEO, holds a Master's Degree in Business Administration and has over two decades of multifaceted leadership experience across various sectors. He is supported by a seasoned management team with extensive expertise. Notably, Mr. Adnan Aftab, the CEO of Select Technologies Limited, holds a Master's Degree in Manufacturing Engineering and has over three decades of experience in manufacturing. Additionally, Mr. Nusrat Mahmood, the CFO, is a distinguished Management Accountant and Chemical Engineer with over two decades of experience across multiple industries, including textiles, fertilizers, and telecommunications. Each functional department has a multi-layered hierarchy with well-defined and documented roles and responsibilities, strengthening management effectiveness. Furthermore, six management committees have been established: the Credit Committee, Risk Management Committee, Sales Control Committee, Cash Management Committee, Operational Control Committee, and Business Plan Committee. These committees enhance overall operational efficacy by enabling focused decision-making and bridging inter-departmental gaps. The Company has implemented SAP, an ERP solution, to maintain a robust reporting system. The internal audit department, which reports directly to the Board’s audit committee, ensures oversight. Detailed MIS reports for senior management are frequently generated for each business unit, including region-wise business partner reports with adjustments, daily stock reports for all warehouses, and product-wise reports of region and corporate limits.

Pakistan’s cellular market has reached a high level of maturity, with tele-density surging to ~80% in FY25 and 95% of networks now 4G-enabled; however, there are only a few 5G-supported mobile sets in Pakistan. While macroeconomic headwinds, specifically elevated inflation, high interest rates, and PKR depreciation, initially constrained purchasing power and shifted demand toward affordable, locally assembled models, the market showed a mixed recovery during 9MFY26. On the supply side, improved foreign exchange liquidity and eased import restrictions facilitated a modest rebound in local manufacturing, supported by government-led localization initiatives. According to PTA data, Pakistan’s mobile handset market remained largely assembly-led, although local production recorded a modest contraction during CY25. Domestic production declined by ~3.7% YoY to 30.21 million units (CY24: 31.38 million), comprising approximately 15 million 2G handsets and 16 million smartphones. In contrast, handset imports increased to ~2.37 million units, indicating relatively stronger demand for imported devices, particularly in higher-end and specialized smartphone segments not fully catered to by local assemblers.During 3MCY26 (Jan–Mar’26), local production stood at 7.36 million units, reflecting a further ~2.6% YoY decline, including ~3.94 million 2G phones and ~3.42 million smartphones. Meanwhile, imports rose to 1.22 million units, reinforcing the trend of gradually increasing reliance on imported devices. The divergence between moderating local output and rising imports suggests evolving consumer preferences toward premium and technologically advanced handsets, while also highlighting competitive and demand-side pressures within the domestic assembly landscape.

Within this landscape, Airlink maintains a strong market position as one of Pakistan’s leading mobile distributors and the sole local manufacturer of Xiaomi smartphones, alongside the assembly of Tecno and itel devices, strengthening its presence across both distribution and domestic manufacturing segments. The Company has strategically evolved into a diversified consumer electronics platform, recently expanding into the local manufacturing of Acer laptops and tablets. Further supporting diversification, Airlink incorporated ZEXO Technologies (Pvt.) Limited in 2025, with its product portfolio currently under evaluation. In addition, through its wholly owned subsidiary, Select Technologies Limited, Airlink established a strategic partnership with HISENSE to locally manufacture and market Smart TVs and air conditioners, broadening its footprint beyond mobile devices into the wider consumer electronics segment. As the macroeconomic environment stabilized in the second half of FY25, supporting a recovery in sales volumes, Airlink began developing a new manufacturing facility within the Sundar Green Special Economic Zone (SGSEZ). This expansion is set to significantly enhance production capacity and operational scale while leveraging critical tax advantages to bolster the Company's long-term business risk profile.

In FY25, Airlink’s consolidated revenue stood at PKR 104.379 billion, representing a contraction from the PKR 129.742 billion recorded in FY24. This topline decline was primarily the result of a challenging fiscal environment, marked by the imposition of higher taxes and elevated device pricing, which, alongside a general slowdown in consumer purchasing power, shifted market demand toward lower-priced models. This cooling trend persisted into 9MFY26, with sales declining modestly year-over-year by ~12.7%, aligning with PTA statistics showing a slight industry-wide reduction in production.

Despite the revenue compression, Airlink demonstrated significant resilience through a sharp improvement in its profitability profile. The Company successfully pivoted to a high-efficiency model, with the gross margin climbing to ~10.6% in FY25 (FY24: ~7.5%) and the operating margin strengthening to ~9.1% (FY24: ~6.5%). This bottom-line expansion was further evidenced by the net profit margin rising to ~4.5%, up from ~3.6% the previous year. This margin-enhancement trajectory further accelerated in 9MFY26, with gross, operating, and net margins reaching ~13.6%, ~11.0%, and ~5.3%, respectively. These figures underscore Airlink’s ability to maintain rigorous cost discipline and optimize production efficiencies, effectively decoupling profitability growth from broader market volume fluctuations.

Airlink has developed into a leading distributor of mobile phones and related devices in Pakistan, supported by an integrated operating model encompassing distribution, manufacturing, and retail. The Group’s business profile is underpinned by long-standing partnerships with international brands across multiple price segments, alongside its role as an authorized reseller in the premium category. Its extensive nationwide distribution network, covering a broad base of cities through multiple regional hubs, provides scale, market penetration, and supply chain stability. The Group has progressively expanded into local manufacturing, establishing smartphone assembly capabilities and subsequently diversifying into adjacent electronics such as smart TVs and computing devices. This gradual backward integration, undertaken through its subsidiary, has strengthened operational control and contributed to product portfolio diversification beyond core handset distribution. Ongoing capacity expansion through the development of a large-scale manufacturing facility at Sundar is expected to further enhance production capabilities and support future growth, including potential export orientation. The phased migration of key production lines and continued collaboration with principal brands indicate a strategy focused on scaling localized manufacturing while maintaining alignment with global partners. In parallel, the Group is broadening its presence into additional consumer durable segments (household appliances), leveraging its existing distribution infrastructure. While this diversification is expected to support growth, it is important to note that these product categories operate under different market dynamics compared to the mobile phone segment, with potentially distinct demand patterns, pricing cycles, and inventory turnover. This may necessitate a more tailored framework and could result in a working capital cycle that differs from the Company’s historical experience in the mobile phone segment.

Overall, Airlink’s sustainability as a group is supported by its diversified brand relationships, expanding manufacturing footprint, and established distribution platform. However, execution of ongoing expansion initiatives, effective management of working capital, and the successful commercialization of newer product segments, while managing the operational risks at an acceptable level, will remain key considerations for maintaining financial and operational stability.

Airlink’s working capital requirements are largely driven by inventory needs across its assembly and distribution operations. During FY25, the Company’s average gross working capital days increased to ~67 days (FY24: ~30 days), while net working capital days rose to ~46 days (FY24: ~18 days). The increase primarily reflected inventory buildup to meet demand from the principals for new launches. Although the free cash flow from operations (FCFO) improved to ~PKR 8,839mln in FY25 from PKR 8,578mln in FY24, supported by improved profitability, the interest coverage ratio moderated to 2.7x (FY24: 3.3x) due to higher finance costs amid an elevated interest rate environment. The Company’s debt repayment capacity remained sound, as reflected by a debt payback ratio of 0.4x in both FY25 and FY24. In 9MFY26, working capital intensity deteriorated, with gross and net working capital days lengthened to 112 and 95 days, respectively, primarily driven by a strategic inventory build-up ahead of new mobile phone model and new product launches, further compounded by logistical bottlenecks and transit lead-time extensions associated with specific modes of transportation. In 9MFY26, FCFO stood at ~PKR 6,819mln, while interest coverage improved to 3.1x (FY25: 2.4x), indicating strengthened cash flow generation and improved capacity to service financial obligations. In 9MFY26, total debt slightly increased to ~PKR 32.7bln; however, the leverage ratio slightly reduced to ~64.1% by March 2026 (FY25: ~64.7%), supported by reduced policy rates.

Short-term funding needs are expected to continue being managed through Sukuk issuances, while long-term project financing has been secured through the syndicated facility for the Sundar Green Special Economic Zone (SGSEZ) project. This proposed long-term facility has been structured into two separate term finance facilities, PKR 1,464mln under Airlink and PKR 3,300 million under Select, to optimize fund allocation and align with project financing requirements.

Financial Covenants:

The indicative term sheet establishes a non-exhaustive set of entity-specific and consolidated financial covenants that the Group Companies are required to maintain throughout the tenor of the Facility. These covenants serve as ongoing performance benchmarks governing the conditions under which the Facility remains in good standing. As at 9MFY26, covenant compliance is assessed as follows:

The consolidated covenant position remains compliant, supported by consolidated Leverage of 2.45x (against a 3.0x ceiling) and Debt/Equity of 1.81x (against a 2.0x limit), indicating manageable leverage and adequate capitalization at the group level. This reflects the benefit of diversified earnings and balance sheet support across the consolidated structure. At the standalone level, however, Airlink has exceeded the Leverage covenant, recording 2.12x against the prescribed ceiling of 2.0x. This is primarily attributable to incremental borrowings undertaken to finance the SGSEZ expansion, highlighting the temporary balance sheet pressure as of Mar’26 associated with the project’s development phase rather than a deterioration in underlying operating capacity. Despite this exception, the broader standalone covenant profile remains satisfactory. The current ratio stands at 1.14x (against a minimum threshold of 1.1x), Debt/Equity at 1.42x (against a ceiling of 1.5x), Debt/EBITDA at 3.16x (against 3.25x), Interest Coverage Ratio (ICR) at 3.60x (against a minimum of 1.5x), and Debt Service Coverage Ratio (DSCR) at 2.99x (against 1.3x). These indicators continue to provide reasonable headroom, reflecting adequate debt servicing capacity and liquidity at the current stage.

Nevertheless, covenant headroom, particularly for leverage and Debt/EBITDA, has narrowed and warrants close monitoring as SGSEZ progresses toward commissioning. The project ramp-up is expected to introduce higher finance and depreciation charges before the full earnings contribution materializes, potentially creating near-term pressure on coverage and leverage metrics. Restoration of standalone leverage headroom remains contingent on timely project execution, successful SGSEZ commercialization, and the generation of incremental operating cash flows, alongside gradual equity accretion through retained earnings over the medium term.

To date, Air Link and its subsidiary, Select, have issued a total of fifteen (15) Sukuks/Instruments, from which currently five Sukuks are available in the market, and the rest have been matured/redeemed. Financial risk profile of the Company remains adequate, supported by improving profitability and demonstrated market access. However, higher borrowing costs, elongated working capital cycle, and execution risk attached to expansionary capex remain monitorable factors.

The proposed facility is a PKR 1,464mln privately placed Term Finance Facility, forming part of a PKR 4,764mln syndicated Islamic long-term facility. The overall facility will be split between Airlink (PKR 1,464mln) and its wholly owned subsidiary, Select Technologies Limited (PKR 3,300mln). The facility will carry a tenor of ten (10) years from first disbursement, inclusive of grace period of up to one year. Principal repayment shall be made in up to thirty-six equal quarterly instalments following expiry of the grace period. Profit is payable quarterly in arrears. Pricing is floating at 3M KIBOR + 125bps, exposing the Company to benchmark rate volatility over the tenor.

The facility structure includes reciprocal cross-corporate guarantees between Airlink and Select Technologies. Accordingly, the credit profile of each obligor carries structural linkage with the other. Any material weakening in Select’s financial position or debt servicing capacity may create contingent pressure on Airlink, and vice versa. The facility ranks pari passu with other secured obligations of the Company, subject to terms of the common security structure.

The rating derives comfort from multiple credit enhancement features. The proposed loan facility is backed by Infra Zamin Pakistan Limited (IZP), covering 75% of outstanding principal, subject to agreed limits and the approval is its final stages. Additional security features include: (i) First pari passu equitable mortgage over specified land and buildings, (ii) First pari passu hypothecation over fixed assets, (iii) First pari passu hypothecation over current assets, (iv) Structured payment waterfall through designated collection and reserve accounts, and (v) Sponsor undertaking for project overruns and funding shortfalls.

Security Structure:

The facility will benefit from a layered security structure comprising shared protections across the Group Companies alongside Airlink-specific enhancements. The loan facility will be guaranteed by IZP covering 75% of the principal; however, the approval remains under process and is currently in its final stages. Additional security will comprise a first pari passu equitable mortgage over approximately eight acres at Sundar Green Special Economic Zone (Airlink: PKR 816.5 million), providing a tangible asset-backed layer. This will be supplemented by first pari passu hypothecation over all present and future fixed assets, including plant and machinery (Airlink: PKR 1,136 million), initially will be created as a ranking charge and subject to perfection within 120 days, along with first pari passu hypothecation over current assets (Airlink: PKR 368 million). The security structure will further be reinforced through reciprocal corporate guarantees between Airlink and Select, a personal guarantee from the primary sponsor, Mr. Muzzaffar Hayat Piracha, and an irrevocable sponsor support undertaking covering project cost overruns and any funding deficiencies in reserve or payment accounts throughout the facility tenor. Airlink-specific protection will be provided through the mandatory routing of at least PKR 2.0 billion of annual wholesale and retail collections via the designated Collection Account. The payment waterfall embeds strong cash-flow discipline. Collections equivalent to at least 1.0x of the outstanding facility amount will be required to pass through the Collection Account annually. Funds will be applied sequentially towards maintaining the Debt Service Reserve Account (DSRA), funding the DPA, and only thereafter released to the Group Companies, subject to the absence of any continuing Event of Default. The DPA will be built through three equal monthly deposits, ensuring full funding of each quarterly debt obligation by its due date, while the DSRA will remain pre-funded and will be maintained at an amount equal to one upcoming quarterly principal instalment throughout the tenor. Overall, the combination of IZP backed guarantee, tangible collateral, sponsor-backed undertakings, and a tightly controlled reserve-account waterfall will materially enhance the recovery prospects and strengthen debt-servicing discipline.

Proceeds Utilization:

The proposed facility is designated for development of a manufacturing complex within the Sundar Green Special Economic Zone (SGSEZ), Lahore, encompassing civil infrastructure, production capacity additions, and business operations support. The Group Companies are contractually restricted from utilizing proceeds for alternate purposes without Lender consent, with quarterly construction progress reports required through to commercial operations commencement. The utilization breakdown is as follows:

The Airlink tranche of PKR 1,464mln covers civil works on its 3-acre plot (PKR 602mln), plant and machinery for the air purifier line targeting 50,000 units per annum (PKR 145mln, full Airlink P&M: PKR 441mln), and working capital support (PKR 276mln). Proceeds utilization risk is partly mitigated by the one-year availability period, after which unutilized portions are automatically cancelled. Successful commissioning within SGSEZ, which confers ten years of fiscal incentives, is a central credit assumption underpinning the Facility’s repayment trajectory.