PACRA assigns Entity ratings to Advance Telecom (Pvt.) Limited

Advance Telecom (Pvt.) Limited ('ATPL' or the 'Company') is engaged in the distribution of feature mobile phones and allied accessories across the country. The telecom sector in Pakistan has experienced significant advancement in recent years, with demand driven up by enhanced connectivity and the increasing adoption of social media. However, the imposition of taxes and high inflation rates have led to a shift in consumer preferences from premium flagship devices to alternatives which provide higher features at affordable rates. ATPL has established itself in the feature mobile phones space, dealing primarily in three major brands, boasting an impressive ~46% average market share in terms of unit volume during FY24. The business acumen of Mr. Abdul Majid, the man at the last mile and the chairman of Advance Telecom, contributes positively to the ratings. The governance structure may be improved through enhancing board size and the inclusion of non-executive and independent directors. ATPL's organizational structure commensurate to its operations. The Company's topline surged to ~PKR 52bln during FY24, compared to ~PKR 13bln during FY23. The topline dipped during FY23 due to import restrictions leading to supply chain constraints. Subsequent lifting of import restrictions and effective marketing campaigns by the Company during FY24 led to a marked improvement to the Company's revenue. ATPL faces sustainability risks due to binding principal agreements and local cost pressures, which have led to tightly compressed margins. Gross margin for FY24 stood at ~4.6% compared to ~4% during FY23. Consequently, the net margin for FY24 was ~0.66%, a marginal improvement from the ~0.52% net margin recorded in FY23. During 2HFY24, the Company has entered into the solar panel market, in an attempt to diversify its topline and aid its bottom-line. A surge in market demand and re-opening of imports gave rise to higher borrowings during FY24, with ATPL's short-term borrowings increasing from ~PKR 1.8bln at end-Jun'23 to ~PKR 5bln at end-Jun'24. The Company's equity stood at ~PKR 1.8bln at end-Jun'24 compared to ~PKR 1.5bln at end-Jun'23.
The ratings are contingent upon the Company's ability to maintain its market share in a dynamic business environment. Enhancing margins is essential for long-term stability, while continued growth in revenue and profitability remains crucial.

About the Entity
Advance Telecom (Pvt.) Limited was incorporated on March 2, 2016 as a private limited company in Karachi, under the repeated Companies Ordinance, 1984. The Company commenced its operations from November 2020. The Company is engaged in the business of sale and distribution of communication and IT related products including cellular mobile / smart phones, accessories and allied products. The Advance Telecom group has been operational since 1996, operating as a sole proprietorship and then as an AOP till 2020.