Select Technologies Limited (referred to as "SELECT" or "the Company") was incorporated in Pakistan on October 13, 2021, as a private limited company under the Companies Act, 2017, and recently converted to a public limited company. The Company's registered head office is located at 152-1-M, Quaid-e-Azam Industrial Area, Kot Lakhpat, Lahore, Punjab, Pakistan. SELECT is a wholly owned subsidiary of Air Link Communication Limited. The Company was established to realize the sponsors' vision of setting up a state-of-the-art mobile phone assembly plant in Pakistan, to promote 'Made in Pakistan' products, and to create employment opportunities. SELECT has forged a strategic partnership with global smartphone leader Xiaomi to assemble a range of popular smartphone brands and models locally in Pakistan. The Company’s primary business is establishing, operating, and managing facilities for the assembly and production of mobile phones of various types and specifications. The Company's factory spans over 120,000 sq. ft. of closed space, including 60,000 sq. ft. of clean room area, with an annual production capacity of approximately 2.7 million units based on a single-shift operation under Select and ~1.8 million units under Airlink. 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 1.4 million 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 Company is a wholly owned subsidiary of Air Link Communication Limited, holding approximately 99.99% of the shares, with the remaining minor stake owned by individual investors. The ownership structure of the Company is deemed stable, with the majority stake held by the parent company; however, the Company plan on listing at PSX after which a change in the shareholding is expected. The sponsoring family plays an active role in the group’s related businesses and possesses a deep understanding of the industry. Under their leadership, the parent company has experienced substantial growth over the years, a success that is also reflected in the performance of Select Technologies Limited. The sponsors of the Company do not hold any shareholding in other companies, which contributes to a focused financial position. As a result, the financial strength of the sponsors is considered to be adequate.

The board of Select Technologies Limited comprises five members: Mr. Muzzaffar Hayat Paracha (Group CEO/ Director), Mr. Amir Mehmood (Group CFO / Director), Mr. Adnan Aftab (CEO of SELECT), Ms. Hina Sarwat (Director), and Mr. Syed Nafees Haider (Director). The board members are seasoned professionals with extensive experience in managing business operations. Mr. Muzzaffar Hayat serves as the Chairman of the Board, bringing over two decades of leadership experience. The Company has established both an Audit Committee and an HR & Remuneration Committee to enhance board effectiveness. Additionally, the inclusion of a female director on the board strengthens the Company's commitment to a diverse and effective governance structure. The Company's external auditors, M/s BDO Ebrahim & Co. Chartered Accountants, are listed in Category 'A' on the SBP’s panel of auditors. They issued an unqualified opinion on the Company’s financial statements for the year ended June 30, 2025, affirming the Company’s compliance with applicable policies and accounting standards.

The organizational structure of the Company is organized into various functional departments, with each department head reporting directly to the CEO, who in turn reports to the Group CEO. Within each department, a clear management hierarchy is in place, allowing for streamlined operations and efficient execution of tasks. The management of the Company consists of qualified and experienced professionals. Mr. Adnan Aftab, the CEO, holds a Master’s degree in Manufacturing Engineering and brings over three decades of experience with leading companies. He is supported by a team of skilled professionals across various divisions, ensuring efficient operations and smooth reporting. Each department head is responsible for managing the operations of the irrespective department. Clearly defined roles and responsibilities within the organization contribute to the overall effectiveness of the organizational structure. The Company has implemented an integrated SAP system, comprising various modules. Management Information System (MIS) reports are generated frequently for senior management, providing detailed insights for informed decision-making. The Company has established an in-house internal audit function to assess and report on risks arising from its operations.

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.

The Company maintains a strategic partnership with Xiaomi, a globally recognized technology brand, for the local assembly and distribution of smartphones and LED TVs in Pakistan. This longstanding association reinforces SELECT’s established market presence and operational credibility, while enabling access to internationally recognized products and established consumer demand. In line with its diversification strategy, the Company has recently partnered with Hisense for the assembly and sale of air conditioners at its new Sundar facility, expanding its footprint beyond consumer electronics into the broader home appliances segment and reducing product concentration risk over the medium term.

During FY25, the Company showed a decline of ~33.4% in its topline and recorded a net sale of ~PKR 48,893mln (FY24: ~PKR 73,460mln). Industry-wide demand has also softened, as reflected in PTA statistics for CY25, which indicate reduction in overall production levels. However, the Company’s margins improved at all levels, with gross, operating, and net margins recorded at approximately 8.3%, 8.0%, and 3.3%, respectively. The improvement in margins during FY25 was primarily driven by a reduction in cost of goods sold (COGS), enhanced operational efficiency, and higher non-core income. The sustainability of the Company is affirmed by SELECT’s association with Xiaomi Corp., the Global Consumer Electronics & Smartphone Giant, as its manufacturing partner for Xiaomi smartphones in Pakistan. Xiaomi is the world’s second-largest vendor by handset shipments. Thus, boding well for the sustainable and quality technology accessible to everyone in Pakistan.

Net sales for the nine months ended March 2026 stood at ~PKR 23,052mln, reflecting a contraction of ~37.1% on a period-over-period basis relative to FY25’s full-year net sales of ~PKR 48,893mln (FY24: ~PKR 73,460mln). The decline is partly structural, reflecting the winding down of high-volume low-margin 4G device production as Select repositions its product mix, and partly cyclical, driven by softer industry-wide smartphone demand. Despite the topline compression, margins improved materially across all levels: gross profit margin rose to 16.2% in 9MFY26 from 8.5% in FY25 and just 5.4% in FY24, driven by a shift toward higher-value Xiaomi models, reduced raw material costs, and enhanced operational efficiency at the existing facility. Operating margin followed suit at 13.4% (FY25: 8.1%), while net profit margin expanded to 5.8% (FY25: 2.7%), reflecting disciplined cost management and lower effective tax burden.

Select’s financial risk profile has shown a notable improvement in profitability metrics through 9MFY26 (period ending March 2026), even as top-line revenue contracted in line with industry trends. The Company’s margin recovery, improved debt service coverage, and significant reduction in related-party borrowings are positive developments that partially offset concerns around working capital elongation and the incremental leverage being assumed through the proposed PKR 3,300mln term finance facility.

EBITDA for 9MFY26 stood at ~PKR 3,488mln (FY25: ~PKR 4,191mln; FY24: ~PKR 3,897mln), while FCFO was recorded at ~PKR 3,169mln (FY25: ~PKR 3,448mln), indicating strong underlying operating cash generation on a nine-month basis. The EBITDA-to-Finance Cost coverage improved to 2.9x in 9MFY26 compared to 1.9x in FY25 and 2.6x in FY24, driven by both earnings’ improvement and a reduction in finance charges following the retirement of related-party borrowings. The interest coverage ratio similarly improved to 2.7x (FY25: 1.6x). The core debt service coverage ratio stood at 2.0x in 9MFY26, a substantial improvement from 1.2x in FY25, reflecting stronger cash generation and improved debt repayment capacity.

Working capital intensity increased meaningfully in 9MFY26, with gross working capital days rising to 138 days (FY25: 77 days; FY24: 27 days) and net working capital days extending to 91 days (FY25: 34 days). The primary driver was a strategic inventory buildup in raw materials (107 days) ahead of anticipated new Xiaomi model launches and HISENSE product onboarding, compounded by logistical delays. Trade receivable days remained controlled at 15 days (FY25: 13 days), indicating maintained collection discipline. Despite the WC elongation, the current ratio improved markedly to 4.6x as at 9MFY26 (FY25: 2.9x; FY24: 3.7x), supported by a PKR 7,931mln reduction in current assets partially offset by a PKR 10,939mln decrease in current liabilities, particularly the elimination of related-party payables.

Total borrowings remained broadly stable at ~PKR 12,952mln in 9MFY26 (Jun-25: ~PKR 12,902mln). A notable structural improvement was the full repayment of related-party borrowings, which stood at PKR 4,125mln in Jun-25 but were reduced to zero by 9MFY26, deleveraging the intra-group funding dependency. The leveraging ratio improved to 51.6% from 61.2% in Jun-25, supported by equity accretion through retained earnings. Shareholders’ equity grew to PKR 12,156mln (Jun-25: PKR 10,818mln), driven by the net profit of ~PKR 1,338mln for the period. Short-term borrowings constitute 92% of total debt in 9MFY26 (Jun-25: 65.5%), reflecting the Company’s continued reliance on STBs for working capital, which is a structural characteristic of the mobile assembly business. The proposed PKR 3,300mln term finance facility, once drawn, will shift this composition toward longer-duration debt, improving the maturity profile.

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. Select remains compliant with all six standalone financial covenants as at 9MFY26, with adequate headroom across key metrics following the settlement of related-party borrowings and a relatively deleveraged balance sheet. The current ratio of 1.16x remains above the minimum 1.1x threshold, while coverage indicators remain comfortable, with ICR at 2.43x and DSCR at 1.84x against minimum requirements of 1.5x and 1.3x, respectively, reflecting satisfactory debt-servicing capacity at the current stage. The principal covenant risk lies in the post-disbursement phase. Utilization of the PKR 3,300 million term finance facility and associated SGSEZ capital expenditure are expected to increase leverage and debt-to-equity metrics ahead of earnings realization from the new production lines. This timing mismatch between debt build-up and EBITDA generation may temporarily compress covenant headroom during the construction and ramp-up period. Accordingly, covenant compliance will remain a key monitoring consideration. It is also noted that any covenant breach constitutes an Event of Default, subject to a 60-day cure period for non-payment defaults, with lenders retaining the right to accelerate repayment or recall the outstanding facility if unresolved.

The proposed loan facility is a PKR 3,300mln privately placed Term Finance Facility, forming part of a PKR 4,764mln syndicated Islamic long-term facility. The companion Airlink tranche of PKR 1,464mln constitutes the remainder of the umbrella facility, with both sub-facilities cross-collateralized and subject to cross-default provisions. 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 will carry a structural linkage with the other. Any material weakening in Airlink’s financial position or debt servicing capacity may create contingent pressure on Select, 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 loan facility will carry a layered, multi-tier security package shared as Common Security between Airlink and Select, supplemented by Select-specific charge allocations. The security package comprises:

(i) 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.

(ii) Immovable Property Mortgage: First pari passu equitable mortgage over land and buildings on Plot Nos. E-4 and E-5 (measuring approximately five acres) located in Sundar Green, Lahore, with a charge allocation of PKR 1,214.5mln for Select.

(iii) Fixed Asset Hypothecation: First pari passu hypothecation over all present and future fixed assets (including plant and machinery) of Select, with a charge allocation of PKR 2,584mln. A ranking charge shall initially be created on fixed assets, with a 120-day deferral period to upgrade to first pari passu status. This temporal subordination during the deferral window is noted.

(iv) Current Asset Hypothecation: First pari passu hypothecation over all present and future current assets of Select, with a charge allocation of PKR 251mln.

(v) Cross-Corporate Guarantee: Mutual cross-corporate guarantee between Select and Airlink Communication Limited (the parent), creating a bilateral contingent obligation. Any material deterioration in Airlink’s financial position creates contingent pressure on Select, and vice versa, as both entities are co-borrowers under the umbrella facility.

(vi) Personal Guarantee: Personal guarantee of Mr. Muzzaffar Hayat Piracha, primary sponsor of Airlink (holding ~26.96% of Airlink’s ordinary shares).

(vii) Sponsor Support: Irrevocable sponsor support undertaking covering all project cost overruns and shortfalls in the Collection Account (CA), Debt Payment Account (DPA), and Debt Service Reserve Account (DSRA), effective for the full tenor of the Facility.

(viii) Lien over Project Accounts: Exclusive lien, charge, and control by the Security Agent (BOP) over the CA, DPA, and DSRA throughout the tenor.

Cash Flow Waterfall Mechanism:

The loan facility will incorporate a structured three-tier collection waterfall maintained through designated Project Accounts held with BOP as Account Bank, each under the exclusive lien and control of the Security Agent for the benefit of the Lenders. The waterfall will operate as follows:

Collection / Revenue Account (CA): Annual revenues equivalent to at least 1.0x the outstanding Facility amount must be routed through the CA. This will create a revenue lock-in mechanism that ring-fences cash flows from Select’s operations relative to the outstanding debt obligation.

Debt Service Reserve Account (DSRA): The DSRA will be required to be pre-funded prior to the first disbursement and be maintained throughout the tenor at an amount equal to 1x the upcoming quarterly principal instalment. The DSRA will be funded first from CA collections under the waterfall priority order. Notably, the DSRA will cover only quarterly principal, without a separate profit reserve.

Debt Payment Account (DPA): The DPA will be funded in three equal monthly tranches, each equivalent to one-third (1/3) of the upcoming quarterly principal and/or profit obligation, ensuring 100% funding on each instalment due date. Upon payment, the DPA balance will reset to zero and be replenished for the subsequent quarter.

Waterfall Priority: (1) First, fund and maintain the DSRA; (2) second, fund the DPA per the monthly schedule; (3) thereafter, any surplus is released to Select for general business operations, subject to no continuing Event of Default. This strict priority ensures debt service obligations take precedence over operating distributions.

Proceeds Utilization:

The proposed facility is designated for the 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 Select tranche of PKR 3,300mln covers civil works on its 3-acre plot (PKR 856mln), plant and machinery of ~PKR 811mln, production enhancement of LED TVs and air conditioners targeting 84,000 and 50,000 units per annum, respectively (LED TVs: PKR 145mln, ACs: PKR 1,300mln), and working capital support (PKR 188mln). 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.