PACRA assigns Preliminary rating to Airlink Communication Limited | PPSTS | PKR 3bln | TBI

Airlink Communication Limited (“Airlink” or “the Company”) is principally engaged in two business verticals; as mobile phones distributor and retailer, and now increasingly taking part in the assembling of smartphone and allied items in Pakistan. The ratings reflect Airlink’s sustainable business fundamentals underpinned by its growing relative position. The Company is considered to be an official partner of multiple leading global brands to ensure diversified earnings from its product portfolio. Recently, PTA also 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. Resultantly, Airlink captures a market share of around ~22% in mobile phone distribution. It has a nationwide network linked with over 16+ hubs & regional offices, 1100 + wholesalers, and 4,000+ retailers with after-sales support service centers in all major cities. During 1HFY24, Airlink witnessed significant topline growth with total sales recorded at PKR 60.5bln on a Y-o-Y basis primarily on the back of rising volume from the assembling operating segment, followed by higher prices of mobile devices. The Company’s revenue contribution from the assembly side was fueled as an outcome of its backward integration strategy when Airlink joined hands with Xiaomi to manufacture/assemble its mobile phones and allied items in Pakistan during 2022 by incorporating a wholly owned subsidiary “Select Technologies (Pvt) Limited”. Airlink’s capital structure is moderately 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 highly changing industry environment. As business grows, prudent financial discipline - particularly in working capital structure, is essential to uphold the ratings.

About the Entity
Airlink was formed as a partnership firm in 2010 for import and distribution of IT-related products & services. In 2014, a new private company was incorporated simultaneously to take over the business of the partnership firm. During 2018, entire partnership business transferred to the Company's books and later in 2019, it got converted into a Public Unlisted Entity. During Sep-21, Airlink was eventually listed on PSX. Mr. Muzaffar Hayat (CEO) and the family own majority stake of the Company while remaining shareholding rests with General Public, Insurance Companies, Banks, DFIs, NBFIs, and others.

About the Instrument
Airlink Communication Limited is set to issue Rated, Secured, Privately Placed, Short-Term Sukuk, marking a strategic financial move for the Company. The Sukuk would be carrying a markup of 6MK+1.75% with a tenor of six months. The underlying instrument will be secured by ranking charge over the current assets of the Company. The Issuer shall maintain and efficiently manage Debt Payment Account (“DPA”) under lien of the Investment Agent whereby the payment equivalent to PKR 750 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 principal and profit would be made in bullet payment.