PACRA assigns Initial Rating to Airlink Communication Limited | PPSTS-II | PKR 3.12bln | July-24

Airlink Communication Limited (“Airlink” or “the Company”) is principally engaged in two business verticals; i) mobile phones distributor and retailer, ii) assembling of smartphone and allied items in Pakistan. The ratings reflect Airlink’s sustainable business fundamentals underpinned by its growing relative position, and the company's association with renowned multiple leading global brands thats ensures diversified earnings from its product portfolio. PTA issued MDM authorizations to 30+ foreign & and local companies to create more jobs in the technical sector and enable consumers to buy locally. Besides, favorable policies, trade and investment liberalization & healthy competition promote shared industry prosperity. As per the management's representation, Airlink captures a market share of around ~22% in mobile phone distribution. During 9MFY24, Airlink experienced substantial consolidated revenue growth, achieving total sales of PKR 92,805 million. This increase was driven primarily by higher volumes in both the assembling and distribution segments, supported by elevated prices of mobile devices. Furthermore, the full financial results are also promising. Airlink's revenue contribution from the assembly side was also fueled as an outcome of its backward integration strategy when Airlink joined hands with Xiaomi Technology Pakistan (Pvt) Limited which is wholly owned subsidary of Xiaomi Corporation China to manufacture/assemble its mobile phones and allied items in Pakistan in 2022 through its subsidiary “Select Technologies (Pvt) Limited”. Going forword the parent company (Airlink) intends to further enhance its focus on the assembly segment, particularly by ramping up production volumes of Techno mobile phones. Airlink’s capital structure is leveraged; mainly comprised of STBs. The financial risk profile is reflected by an improved working capital cycle, comfortable coverages, and healthy cash flows.
The ratings are dependent on the Company’s ability to sustain its relative position amidst a highly changing industry environment. As business grows, prudent financial discipline - particularly in working capital structure, is essential to uphold the ratings, to which the management fully subsribes.

About the Entity
Airlink is a public listed company primarily engaged in the distribution and assembly of mobile phones and allied products. Mr. Muzaffar Hayat (CEO) and the family own a majority stake in the Company while the remaining shareholding rests with the General Public, Insurance Companies, Banks, DFIs, NBFIs, and others.

About the Instrument
Airlink Communication Limited has issued the second Rated, Secured, Privately Placed, Short-Term Sukuk-II (while Sukuk-I is already in the market), marking a strategic financial move for the Company. The Sukuk carries a markup of 6MK+1.75% with a tenor of six months. The underlying instrument is secured by ranking charge over the current assets of the Company. The Issuer shall also maintain and efficiently manage Debt Payment Account (“DPA”) under lien of the Investment Agent whereby the payment equivalent to PKR 780 million shall be made starting from 45 days before the maturity date, and every fortnight thereafter, such that amount equivalent to full issue amount is available in the DPA five days before the maturity date. The repayment of principal and profit would be made in bullet payment.