PACRA assigns Preliminary Ratings to Airlink Communication Limited - PPSTS-III - PKR 4.0bln - TBI

Airlink Communication Limited (“Airlink” or “the Company”) operates primarily in two business verticals: i) mobile phone distribution and retail, and ii) assembly of smartphones and related products in Pakistan. The Company’s ratings reflect strong business fundamentals in both business verticals, further supported by its improving market position and partnerships with multiple leading global brands, which ensure a diversified earnings portfolio. As per the data published by the Pakistan Telecommunication Authority (PTA), during 7MCY24, 18.95mln mobile devices have been manufactured compared to 21.28mln devices manufactured during CY23 reflecting a substantial growth of ~53% on an annualized basis. According to management, Airlink holds approximately 22% market share in mobile phone distribution. During FY24, the Company achieved substantial consolidated revenue growth, reaching total sales of PKR 129,742 million, primarily driven by higher volumes alongside rising mobile device prices. Revenue from the assembly segment increased significantly due to Airlink's partnership with Xiaomi Pakistan (Pvt) Limited through its subsidiary, Select Technologies (Pvt) Limited, which focuses on assembling Xiaomi mobile phones in Pakistan. Moving forward, Airlink intends to enhance its focus on the assembly and distribution segments simultaneously. The financial risk profile demonstrates an improved working capital cycle, comfortable coverage ratios, and healthy cash flows. The company's growth requires additional working capital, which is being provided through a combination of short-term borrowings and internally generated cash flows, all while maintaining the integrity of the financial risk matrix. Going forward, the company has secured an exclusive partnership with Acer Gadget Inc. to assemble and introduce their product line comprising laptops, tablets, etc to the local market by leveraging Airlink’s already established nationwide distribution network.
The Company’s ratings depend on its ability to maintain its market position in a rapidly changing industry environment. As business grows, prudent financial discipline—especially regarding the working capital structure—is essential to uphold these ratings, a principle to which management is fully committed.

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 is set to issue the third Rated, Secured, Privately Placed, Short-Term Sukuk-III (while PPSTS-I of PKR 3bln is being redeemed and PPSTS-II of PKR 3.12bln is in the market). PPSTS-III 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 a Debt Payment Account (“DPA”) under lien of the Investment Agent whereby the payment equivalent to PKR 1,000 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.