PACRA Assigns Initial Ratings to Select Technologies (Pvt.) Limited | PPSTS | PKR 4.0bln | Dec 24

Select Technologies (Private) Limited (hereafter referred to as ‘SELECT’ or ‘the Company’), a wholly owned subsidiary of Air Link Communication Limited, specializes in manufacturing, assembling, and selling smartphones and accessories in Pakistan under renowned mobile brands. SELECT has emerged as a key player in Pakistan's technology sector, supported by a sustainable business model and strong backing from its parent company. In 2022, SELECT partnered with Xiaomi Inc., becoming its official assembly partner in Pakistan. This collaboration led to the establishment of a state-of-the-art assembly line in Lahore, with an annual capacity of 2.7 million units per shift. Xiaomi is renowned globally for its high-quality products at competitive prices. In 2024, Xiaomi shipped over 169mln smartphone units globally (CY23: 153mln), capturing ~14% of the global market. In China, Xiaomi holds the third-largest market share (15.7%), following Vivo (18%) and Huawei (16.3%). The strategic partnership between Xiaomi and SELECT aims to drive revenue growth through efficient supply chain management, competitive pricing, and expanding market presence in Pakistan's telecom sector. According to the Pakistan Telecommunication Authority's (PTA) latest statistics, SELECT holds ~13% market share of the local smartphone assembly and ~8% of total mobile devices manufactured (including 2G). During 1HFY25, the Company’s revenue declined by ~13.7% to PKR 27.7bln compared to the same period last year, mainly due to a temporary dip in demand caused by higher taxes. However, as per the management’s representation, market price adjustments are now assimilated, and volumes are once again rising. SELECT’s capital structure is leveraged, mainly through short-term borrowings to meet 100% cash margin requirements for importing mobile parts. However, the Company benefits from an agreement with Xiaomi Pakistan (Pvt.) Ltd., requiring the buyer to purchase finished goods within 7 days with full payment, ensuring an efficient working capital cycle. The Company's coverages and cash flows are robust. Going forward, SELECT plans to expand its product portfolio by assembling Xiaomi Smart TVs, further diversifying its offerings.
The ratings are dependent on the Company's ability to maintain its market share and continue its sustainable partnership with the global brand. Consistent business growth, coupled with prudent financial discipline—especially in terms of capital structure and working capital management, is essential to uphold the ratings.

About the Entity
Select Technologies (Pvt.) Limited was incorporated in 2021 as a private limited entity. The Company’s ~99.9% stake rests with AIRLINK (parent company).

About the Instrument
Select Technologies (Pvt.) Limited plans to issue a Rated, Secured, Privately Placed, Short-Term Sukuk valued at PKR 4 billion. This Sukuk features a markup of 6MK + 1.75% with a tenure of six months and is secured by a ranking charge over the company’s current assets. To ensure smooth repayment, the Issuer will maintain a Debt Payment Account (DPA) under the lien of the Investment Agent. Starting 47 days before the maturity date, PKR 1,000 million will be deposited into the DPA every fortnight. This process ensures the full issue amount is available in the DPA five days before the maturity date. Both principal and profit will be repaid in a single bullet payment at maturity.