PACRA Assigns Initial Ratings to Airlink Communication Limited - PPSTS-III - PKR 4.0bln – Sep 24

Airlink Communication Limited (“Airlink” or “the Company”) operates in two business verticals: mobile phone distribution and retail, and assembly of smartphones and related products in Pakistan. The Company’s ratings reflect strong business fundamentals, supported by its prominent market position and partnerships with leading global brands, ensuring a diversified earnings portfolio. As per Pakistan Telecommunication Authority (PTA), during 9MCY24, 22.59mln mobile devices were manufactured compared to ~21.28mln devices during CY23 reflecting a substantial growth of ~42% on an annualized basis. According to the management, Airlink holds ~22% market share in mobile phone distribution. During FY24, the Company achieved substantial revenue growth, recording consolidated total sales of PKR 129,742mln, primarily driven by higher volumes in both the assembly and distribution segments, supported by rising mobile device prices. Revenue from the assembly segment increased significantly due to Airlink's backward integration strategy, involving a partnership with Xiaomi Pakistan (Pvt) Limited, a wholly-owned subsidiary of Xiaomi Corporation, China, and Airlink’s subsidiary, Select Technologies (Pvt) Limited, which focuses on assembling mobile phones and related products in Pakistan. Moving forward, Airlink intends to enhance its focus on the assembly segment, particularly by increasing production volumes of Tecno mobile phones. Airlink’s capital structure is leveraged, primarily consisting of short-term borrowings. The financial risk profile demonstrates an improved working capital cycle, comfortable coverage ratios, and healthy cash flows. The company's growth requires additional funding in the working capital, which is being provided through a combination of debt 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 its product line comprising laptops, tablets, etc to the local market by capitalizing on Airlink’s already-established nationwide distribution and retail network.
The Company’s ratings depend on its ability to maintain its market position in a rapidly changing industry environment. 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.

About the Instrument
Airlink has issued the third Rated, Secured, Privately Placed, Short-Term Sukuk-III (while PPSTS-I of PKR 3bln was redeemed on 18th September 2024 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 manage a Debt Payment Account (“DPA”) under lien of the Investment Agent whereby the payment of 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.