August 30, 2021: Mobile manufacturing appears to be another flourishing segment of Pakistan as it has become the talk of the town since PTA released the data as per which, the production of mobile phones by local manufacturing plants surpassed the mobile phone import.
The government is also encouraging mobile phone manufacturing in Pakistan through Mobile Device Manufacturing Policy, 2020 in order to reduce import dependence and scale up the production capacity to generate exportable surpluses.
Not to forget, under the vision of Make in Pakistan, the tariff structure has been rationalized by creating a tariff differential between Completely Built-Up Unit (CBU) and Completely Knocked Down (CKD) and Semi Knocked Down (SKD) kits.
To make the most out of it, Airlink Communication Limited, the largest distributor of mobile phones & accessories in Pakistan is planning to issue 90,000,000 ordinary shares at a floor price of Rs 65/share with the maximum ceiling rate at Rs 91/share (with the price band set at 40%).
The process would be conducted through 100% book building. Out of the 90mn shares being issued 60mn would be issued by Airlink Communication Ltd (IPO) and the rest 30mn (OFS) by Muzaffar Hayat Piracha who is the CEO of the company.
Of the book-building process, 75% would be assigned to corporates and high net worth individuals and the rest of the 25% will be allocated to the retail traders.
The company is planning to raise Rs5.85 bn through this process where Rs3.9 bn would be through the new issuance of shares offered by Airlink Communication Limited and the rest Rs1.95 bn would be raised through an offer of sale through the shares offered by the CEO as mentioned above. The money raised through this will be used by the company to fund their working capital requirements going forward, a report by Darson Securities noted.
Airlink Communication Limited is one of the primary distributors and assemblers of cellular devices within Pakistan. The company is one of the largest mobile phone distributors of Pakistan with a market share of around 20% within imported mobile phones.
Initially, the company operated as an “importer-cum-distributor” business model. However, the company has started to manufacture mobile phones locally in Pakistan since April’ 21 with a monthly capacity of 400,000/units per month which is expected to reach up to 550,000/units per month by FY23.
Currently, the monthly production is 150,000 units and the management believes that capacity to reach 100% utilization by the end of CY21. To highlight, the value addition from the assembly plant is $2.5 per unit.
The company also plans to expand its retail network from 14 stores in FY21 to 150 stores by FY26 to enhance its presence in the retail zone. This would enable the company to pocket additional 3-10% margins on retail sales, Muqeet Naeem, Research Analyst at Ismail Iqbal Securities said.
Further, the company is also seeking to expand its E-commerce presence as it has a fully functional state-of-the-art online store. E-commerce is an emerging sector where it continues to show growth as during FY21 the country posted cumulative eCommerce sales of Rs235bn up by 56% from the SPLY.
The country also showed a growth in digital payments of 55% in FY21 as there were 93.8bn payments made through digital channels.
Further, the government is also making efforts such as distributing tablets among e-commerce entrepreneurs through the Ehsaas and the Kamyab Jawan Program and also integrating payments channels to make digital payments seamless.
This will help Airlink immensely as it can connect to consumers within remote areas of the country and perhaps even to global consumers in the future, Vali Nagaria, Research Analyst at Darson Securities said.
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