PACRA Assigns Preliminary Ratings to Select Technologies (Pvt.) Limited | PPSTS | PKR 4.0bln | TBI

Select Technologies (Private) Limited (‘SELECT’ or ‘the Company’) is a wholly owned subsidiary of Air Link Communication Limited. The Company is currently engaged in the manufacturing/assembling, and sales of smartphones & allied items in Pakistan under renowned and leading mobile phones brand. The Company benefits from solid group support, which underpins its sustainable business profile in Pakistan’s technology sector. In 2022, SELECT partnered with Xiaomi Inc., becoming its official assembler in Pakistan. A state-of-the-art assembly line was established in Lahore with a capacity of 2.7 million mobile units annually (single shift). Xiaomi, consistently ranked among the top three global smartphone manufacturers, shipped 42.8 million units in 3QCY24, capturing 13.5% of the global market—trailing only Apple and Samsung. In Pakistan, SELECT leverages this partnership to enhance earnings through efficient supply-chain management, competitive pricing, and growing market share. The local mobile phone industry in Pakistan is progressing rapidly, supported by expanding network coverage, increasing demand for technology, and a shift from feature phones to smartphones among a population of ~225mln. Post-implementation of DIRBS, local smartphone assembly has grown significantly, curbing illegal imports and fostering domestic production and export potential. During 9MCY24, local assembly surged to 22.59mln units, reflecting a 41% annualized growth compared to FY23. SELECT reported significant growth in FY24, with sales reaching PKR 73.4bln, driven by higher volumes and improved pricing. The Company’s profitability has also improved, supported by a strong topline. SELECT’s capital structure is leveraged, primarily comprising short-term borrowings to meet 100% cash margin requirements for opening LCs for importing mobile parts. However, the Company benefits from its agreed terms with Xiaomi Pakistan (Pvt.) Ltd. where the buyer is required to purchase the finished goods within 7 days by making full payment thus exhibiting an efficient working capital cycle. The Company’s coverages and cashflows are robust. Going forward, the Company is poised to expand its product portfolio by assembling Xiaomi Smart TVs, further diversifying its product slate.
The ratings are dependent on the Company’s ability to sustain its relative share and its sustainable business partnership with the global brand. As business grows, prudent financial discipline - particularly in capital structure, 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 is set to issue a Rated, Secured, Privately Placed, Short-Term Sukuk of PKR 4bln. PPSTS 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 47 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.