SELECT IPO: Buy the Story or Buy the Numbers?

June 21, 2026 (MLN): Pakistan's first standalone smartphone assembler is about to test the public market's appetite for a story built on a single customer relationship, a tax-sheltered new factory, and a balance sheet that has spent two of the last three years burning cash while reporting a profit.

Book-building opens June 22–23, 2026, at a floor price of Rs 28 per share, with a price band extending to Rs 42.

Mettis Global reviewed Select Technologies Limited's (SELECT) prospectus in detail and put a set of specific, numbers-based questions to the company's leadership. What follows is an investor education briefing built on three things: what the prospectus discloses, what management has said in response to our questions, and, critically, what remains unanswered as of publication.

THE OPPORTUNITY:

A genuine first-mover position

SELECT will be the first standalone mobile and smart devices manufacturer listed on the Pakistan Stock Exchange. Its partnership with Xiaomi, the world's third-largest smartphone brand by global share, dates back to 2021, and a newer manufacturing agreement with Hisense (the world's third-largest TV brand and global leader in 100-inch+ displays) adds a second global principal to the relationship base.

A real and durable tax shield

The company's move to the Sundar Green Special Economic Zone comes with tax exemption through FY2035, a full decade of fiscal advantage that, if utilised well, should structurally widen post-tax margins relative to a non-SEZ competitor.

Management told Mettis Global the SEZ relocation was "a strategic necessity and an easy decision" given the incentive, location, and operational benefits, noting the existing QIE facility faces space and infrastructure constraints that limit new product launches.

Margin trajectory is improving

Gross margin rose from 5% in FY2024 to 9% in FY2025 and 16% in the nine months through March 2026 (9MFY2026). Net margin moved from 2% to 3% to 6% over the same stretch.

Source: Company Prospectus

Asked what is driving this, management attributed the 9MFY2026 improvement to fluctuations in global memory prices, which prompted its principal to consolidate order quantities and increase margins, and gave forward guidance of a normalized gross margin range of 10–11%, with smartphones settling at 8–9% and TVs/ACs contributing 15–20% as their share of revenue grows.

Capacity is expanding meaningfully

Post-Sundar SEZ, combined production capacity rises to 7 million smartphones, 360,000 Smart TVs, and 400,000 AC units annually, a substantial step up from the current QIE facility.

Source: Company Prospectus

A genuine diversification logic behind appliances

Management's strongest argument in its response to Mettis Global was on appliance penetration.

Only 16.5% of Pakistani households own an air conditioner versus 72% smartphone penetration, and Pakistan's installed solar capacity has grown from 190 MW in FY2020 to 33,350 MW in FY2026, making AC ownership newly affordable for a wider household base.

Appliance gross margins of 15%+ compare favourably to 8–9% for smartphones.

Airlink, the 100% pre-IPO sponsor, is selling entirely new shares, there is no secondary share sale. Sponsors retain roughly 90% of the company post-listing, subject to regulatory lock-in, meaning founders are not cashing out at the public's expense.

THE CONCERNS

Revenue is not growing, it is swinging wildly

From Rs 15.4 billion in FY2023, revenue surged to Rs 73.5 billion in FY2024, then fell to Rs 48.9 billion in FY2025, and 9MFY2026 revenue stands at Rs 23.1 billion, annualising to roughly Rs 31 billion, a further decline.

The prospectus itself attributes the FY2024 spike to a catch-up in demand following FY2023's government-imposed LC import restrictions, not organic growth, meaning the often-cited "152% CAGR" figures in the valuation section are anchored to an artificially depressed base year.

Operating cash flow has been negative

Operating cash flow has been negative in two of the last three years, even while the company reported profits. Cash flow from operations was a positive Rs 1.1 billion in FY2023, then swung to outflows of Rs 4.0 billion in FY2024 and Rs 2.96 billion in FY2025, before a smaller Rs 372 million outflow in 9MFY2026.

This divergence between accounting profit and actual cash generation is the single most important number in the entire prospectus: the core business currently consumes cash rather than generates it, financed through short-term debt and parent-company credit support.

Leverage is high and overwhelmingly short-term

Total borrowings rose from Rs 6.4 billion (FY2023) to Rs 17.0 billion (FY2025), with debt-to-equity climbing from 118% to 157% over the same period (107% in 9MFY2026).

Interest coverage fell to just 0.97x in FY2023, meaning operating profit did not even cover interest expense that year, before recovering to 2.40x in 9MFY2026. Short-term borrowings made up the overwhelming majority of total debt throughout, rising from Rs 2.5 billion to Rs 11.9 billion, leaving the company exposed to any tightening of bank credit lines.

The company's own working capital cycle has been highly volatile. Per the prospectus's liquidity risk disclosure, gross working capital days moved from 124 (FY2023) to 28 (FY2024) to 112 (FY2025), a swing that the document attributes generally to financing needs for inventory and Letter of Credit margin requirements, without fully explaining the FY2024 anomaly.

Nearly half the IPO proceeds are earmarked for working capital, not new capacity

Of the total Rs 2.46 billion raised at floor price, 43% (Rs 1.06 billion) goes to working capital, while the remaining 57% is split across AC assembly machinery (25%), smartphone machinery (17%), and TV assembly machinery (15%).

 Asked directly about this allocation, management described working capital as "the engine of growth" that funds the cycle from LC opening through to sales and distribution, and said the allocation is expected to improve liquidity, reduce leverage, strengthen cash flows, and enhance financial flexibility.

No purchase orders had been formally issued for the new machinery

The disclaimer printed on the prospectus's own cover page states that machinery orders "previously disclosed as placed based on commercial understandings and supplier confirmations" are now "pending, with the related commercial terms being revisited with the respective suppliers”, a consequence of the IPO timeline shifting. Equipment delivery and commissioning across all three new production lines is targeted for Q1–Q2 FY2027, contingent on IPO proceeds materialising.

Existing TV capacity is barely used, yet new TV capacity is being built

 SELECT's current TV assembly line at QIE has capacity for 180,000 units annually but ran at just 5% utilisation in the period reviewed, while smartphone capacity utilisation stood at 58%.

 IPO proceeds are nonetheless allocated toward a new TV assembly line in the SEZ facility.

A related entity controlled by the same family

On December 1, 2025, Airlink incorporated Zexo Technologies (Private) Limited as a wholly owned subsidiary, with a stated mandate covering manufacturing, import, distribution, retail, and e-commerce of smartphones, electronics, and home appliances, the same broad category SELECT operates in.

SELECT's Chairman, Muzzaffar Hayat Piracha, and director Rabiya Muzzaffar both sit on Zexo's board. The prospectus describes Zexo as having "a different product and market focus" intended to allow "operational independence and risk isolation," but does not detail contractual safeguards preventing overlap. Mettis Global asked management directly what legal protections exist against this conflict; no response has been received to date.

Related party flows with the parent are enormous relative to SELECT's size

Airlink processed Rs 80.7 billion of expenses on SELECT's behalf in FY2024 and Rs 54.1 billion in FY2025, sums comparable to SELECT's own annual revenue, with a net payable to Airlink that has grown to Rs 4.1 billion.

All transactions are described as arm's length, but no independent verification process is detailed in the prospectus. Mettis Global asked what audit committee oversight exists for this; no response has been received to date.

The valuation rests heavily on assumptions years into the future

The Joint Consultants' DCF model yields a fair value of Rs 46.75 per share against the Rs 28 floor price, a 67% implied upside.

But the present value of terminal value (Rs 39.6 billion) represents roughly 73% of total enterprise value (Rs 54.6 billion), built on a 3.5% terminal growth assumption extending to FY2031. Mettis Global asked which two or three operating assumptions are most critical to that terminal value being realised; no response has been received to date.

WHAT MANAGEMENT TOLD US

In response to Mettis Global's outreach, Select Technologies' management provided a written set of general investor responses. Several points are worth citing directly for context:

On the rationale for listing, management said the IPO supports the company's "aggressive expansion into smartphones, Smart-TVs, and Air Conditioners," and that "global brands also prefer listed manufacturing partners subject to strict governance and disclosure requirements."

On managing customer concentration, management framed the Xiaomi and Hisense relationships as something to deepen rather than dilute: the goal, in their words, is to become "indispensable to them, not dependent on them" through product diversification, long-term agreements, and strategic inventory buffers, though no specific contractual protections (such as minimum offtake commitments) were disclosed.

On valuation, management told Mettis Global that at the floor price, investors are offered an FY2027 forward P/E of 8.16x, a figure representing a 24% discount to sector peers, alongside a projected 47% PAT CAGR and a growing dividend.

 It should be noted this forward multiple does not appear in the prospectus's own valuation section, which instead discloses a P/E of 12.19x based on FY2025 actual earnings (a 33% discount to the sector's weighted average of 18.15x).

The 8.16x figure reflects management's own forward earnings projection and has not been independently verified against the consultants' published financial model in the prospectus.

On the broader pitch to investors, management closed with: "The Company has demonstrated management resilience through COVID-19 and LC restriction periods while continuing to grow... We view the valuation as attractive and encourage investors to form their own considered view of the opportunity."

QUESTIONS STILL AWAITING A RESPONSE

Here is where we have to be candid with readers. Mettis Global put 13 specific, numbers-based questions to Select Technologies' management, the kind of questions a careful investor would want answered before committing capital at book-building.

What came back was a written response, and we have quoted it at length above. But on a side-by-side read, it becomes clear that the response addresses a broader, more general set of investor-relations themes rather than the particular figures and risks we raised. 

On Revenue and the Customer Relationship

We asked what specific, contracted Xiaomi order volumes, not general assurances about “deepening the relationship”, actually underpin the projected revenue recovery for H2 FY2026 and FY2027. We have not received an answer.

 We also asked for the company's normalised net margin once the one-off Apple smartphone resale revenue of Rs 412 million in FY2025 is stripped out, since that single transaction accounted for a meaningful share of that year's reported profit. That figure has not been provided either.

On the structure of the Xiaomi relationship itself, we wanted to know whether the manufacturing agreement includes any minimum offtake commitment, volume guarantee, or right of first refusal that would protect SELECT if Xiaomi onboards another local assembler, and separately, who actually sets the transfer price on the SKD/CKD kits SELECT imports from Xiaomi Hong Kong, given Xiaomi sits on both sides of that transaction as supplier and customer. Neither question has been addressed.

On Cash Flow and Balance Sheet Resilience

This is the area where we most wanted a direct answer, and didn't get one. We asked at what point management expects operating cash flow to turn consistently positive without leaning on Airlink's credit support, given the company has now posted negative operating cash flow in two of the last three years despite reporting accounting profits throughout. We also asked what contingency plan exists if lenders trim SELECT's short-term credit facilities, since 92% of total debt is short-term in nature.

And we asked, plainly, what drove the working capital cycle's swing between 124, 28, and 112 days across the three reported years, a pattern that looks less like a managed cycle and more like one at the mercy of external financing conditions. All three questions remain unanswered.

On the Expansion Plan Itself

Given that the prospectus's own cover page discloses that machinery orders previously described as placed have not, in fact, been formally issued, we asked for a realistic downside scenario if Sundar SEZ equipment delivery slips beyond the targeted Q2 FY2027 window. We also asked, more simply, why new TV assembly capacity is being built when the existing 180,000-unit line is running at just 5% utilisation. Neither question received a direct response.

The Question We Most Wanted Answered

If there is one open question that should weigh most heavily on a prospective investor's mind, it is this one. Zexo Technologies was incorporated by Airlink in December 2025, weeks before this IPO was filed, with a stated mandate covering the same broad categories, smartphones, electronics, home appliances, that SELECT operates in, and with SELECT's own Chairman and a fellow director sitting on its board.

We asked, directly, what contractual or legal safeguards prevent Zexo from competing for the same brand partnerships and contracts SELECT is pursuing. We have not received an answer.

We also asked what independent oversight exists to verify that the Rs 80.7 billion in FY2024 and Rs 54.1 billion in FY2025 of intercompany flows with Airlink, sums roughly equivalent to SELECT's own annual revenue, were genuinely conducted on arm's-length terms. That, too, remains open.

On Valuation and What Comes After Listing

Finally, we asked which two or three operating assumptions are most critical to achieving the terminal value that accounts for roughly 73% of the DCF-implied enterprise value, essentially, what has to go right for the Rs 46.75 fair value to hold up.

And we asked what investor relations infrastructure, in terms of earnings guidance, briefings, or analyst engagement, is planned post-listing, given the company will trade with only a 10% free float. Both questions are still on the table.

To be fair to management, the response we did receive was thoughtful on the themes it chose to address, particularly on the AC opportunity and the broader growth narrative, and we have cited it at length in this piece.

 But the questions above are not abstract. They are the specific, verifiable details that separate a story investors can underwrite from one they are simply asked to trust. Mettis Global will publish management's responses to these questions in full, with appropriate context, if and when they are received.

INVESTMENT HORIZON

This is not a short-term trading proposition. With a 10% free float and a revenue base that depends almost entirely on one customer's order timing, the stock is likely to see thin liquidity and volatile price discovery in its early trading life.

It may suit patient, long-horizon capital comfortable with 12–24 months of earnings and cash-flow volatility while the Sundar SEZ facility comes online (targeted Q1–Q2 FY2027) and the Hisense AC line begins contributing meaningfully — an outcome that is not yet visible in the numbers and depends on execution risk the company has not yet fully addressed in its public disclosures.

Income-focused investors should note there is no disclosed dividend history, though management has referenced a "growing dividend" as part of its forward pitch.

Investors prioritising governance clarity and cash generation may wish to wait for the unanswered questions above, particularly on Zexo, related party oversight, and the path to positive operating cash flow, to be addressed before committing capital.

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