Multinet Pakistan Pvt. Limited (‘Multinet’ or ‘the Company’) was incorporated in 1996, as a private limited company

The Company was founded by Mr. Adnan Asdar Ali and Mr. Nasser Khan Ghazi in 1996, and began as the branded reseller of internet and data connectivity services. Later in 2006, the 89% majority shareholding was acquired by TM International Limited (now called Axiata) of Telekom Malaysia. In Nov-18, Axiata fully exited from Multinet, transferring all of the shareholding to Mr. Adnan Asdar Ali. Multinet is currently engaged in providing connectivity infrastructure and solutions to Telecos, corporates, SMEs, and financial institutions.

Primary business activity of the Company are to provide telecommunication, electronic media and connectivity infrastructure and solutions, including internet services, design, development, implementation of networks. Moreover, value added services include voice services, data center, audio and video conferencing, hosting applications and servers.

The ownership of the company is predominantly concentrated, with Mr. Adnan Asdar Ali holding an 99.9% stake. The remaining shares are modestly distributed among the company’s directors, CEO, and VP of Energy.

Ownership of the Company seems stable. The Sponsor has a respectable standing in the technology segment.

Mr. Adnan Asdar Ali, the Chairman and co-founder of the Company, has more than 37 years of experience in connectivity-based solutions and network infrastructure. He co-founded the Company in 1996, and is responsible for building partnerships and synergies with renowned technology manufacturers.

Financial strength of the Sponsor is considered adequate. Moreover, the Sponsor is engaged in software houses, telemedicine, water filtration and mobile application development, through multiple associated companies.

Board of Directors comprises of 4 members. Mr. Adnan Asdar Ali serves as an Executive Director, while Mr. Sohail P. Ahmad, Joozer JiwaKhan and Anwar Ali Khan serves as an Independent Director.

Mr. Adnan Asdar Ali, the co-founder, has more than 37 years of experience in connectivity-based solutions and network infrastructure

Last year, the Board established an audit committee to ensure the seamless execution of the audit process. Mr. Sohail P. Ahmad has been appointed as the chair of the committee.

The Company’s external auditors, Baker Tilly Mehmood Idrees Qamar have expressed an unqualified opinion on the financial statements of the Company for the year ended Dec-24. The firm is QCR rated and is in SBP’s category ‘A’ panel of auditors.

The Company’s organizational structure reflects clear reporting lines and is split between Operations, Administrative, Legal, Human Resource and Business Development. Each function is monitored by head of department, who reports to the CEO

The management comprises experienced and qualified individuals. Mr. Adnan Hayat Zaidi, the Chief Executive Officer, is an IT graduate. He has more than 22 years of experience in the technology industry, and has been a part of the Company since 2002. Mr. Umer Zahoor, the CFO, is a Chartered Accountant and has an overall experience of 15+ years. He is associated with the Company since 2014.

The Company has one management committee in place named Steering Committee. It includes all the departmental heads, along with the CEO (Mr. Adnan Hayat Zaidi). Policies, procedures, budgets and key performance parameters are discussed in the committee meetings regularly to review activity. Whereas, weekly and monthly reports are shared with the CEO regarding the projects’ status.

The Company has developed oracle as its Enterprise Resource Planning (ERP) System.

EY is the company's internal auditor, conducting quarterly reviews of internal controls and submitting reports to the Board of Directors to maintain strong operational control.

With a growing youth population, increasing internet penetration and thriving startup ecosystem, Pakistan is poised to become a significant player in digital economy and achieve the goal of national growth and prosperity. From July 2023 to June 2024, Pakistan’s IT exports reached $3.223 billion, compared to $2.596 billion in the same period of the previous financial year. The IT industry is striving to increase IT exports with the full support of SIFC (Special Investment Facilitation Council), IT ministry, Pakistan Software Export Board. The present coalition government is paying special attention towards information technology (IT) and had earmarked over Rs79 billion for it in the budget 2024-25, the highest allocation in country’s history.

25% of cellular traffic and 50% of financial market traffic runs through Multinet Pakistan Pvt. Limited.

The Company has segregated revenue streams according to nature of its clientele. There are four different business units of the Company: 

Enterprise Business Units (EBU): Information Communication and Technology (ICT) services are provided to corporates and SMEs. Corporates include financial institutions and multinational companies. EBUs contributed PKR 3,368mln (CY23: PKR 2,908mln) to the total revenue during CY24.

Carrier Business Unit Domestic (CBUD): In this segment, local telecom operators, Internet Service Providers, and Cable Operators are provided infrastructure for connectivity. These include long term contracts with Telenor Pakistan, China Mobile, Transworld and Mobilink. This Contributed PKR 787mln during FY24 (FY23: PKR 676mln).

Carrier Business Unit International (CBUI): The Company caters to international data and voice businesses with global operators. These include Tata Communications, Telebiz International, Verizon Business and BICs among others. This unit contributed PKR 787mln during CY24 (CY23: PKR 676mln).

Long Distance International (LDI): The Company offers global coverage for long distance international voice calls with routing and billing options. Revenue contribution stood at PKR 82mln during CY24 (CY23: PKR 135mln)  

The Company demonstrated robust financial performance in CY24, marked by a significant 6.8% growth in topline, reaching PKR 4.8 billion. This represents a strong recovery from the 6.2% contraction experienced in CY23, highlighting the effectiveness of strategic initiatives. Gross profitability witnessed a substantial uplift in CY24, with Gross Profit expanding to PKR 1.7 billion from PKR 1.3 billion in the prior year. This PKR 400 million increase underscores improved cost management and/or pricing power. Operational efficiency gains are evident in the more than doubling of Operating Profit to PKR 536 million in CY24 (CY23: PKR 231 million). This significant improvement reflects enhanced operational management and expense control. The Company's bottom line exhibited strong positive momentum, with Net Profit more than doubling to PKR 255 million in CY24, a substantial increase from PKR 112 million in CY23. This significant growth underscores the overall strengthening of the Company's financial health and profitability.

The observed expansion in the Company's profitability margins signals a notable strengthening of its financial profile. The gross profit margin improved significantly to 35% in CY24 from 30% in the prior year, indicating enhanced cost efficiencies in the production and service delivery process. This improvement suggests a greater proportion of revenue is translating directly into profit before operating expenses. Furthermore, the operating profit margin demonstrated substantial progress, reaching 11% in CY24, a considerable increase from the 5.1% recorded in CY23. This expansion underscores improved operational management and a more effective control over operating expenditures relative to the revenue base. The net profit margin also exhibited a positive trajectory, rising to 5.2% in CY24 from 2.4% in CY23. This improvement at the bottom line reflects the combined effects of the enhanced gross and operating profit margins, indicating a greater ability to convert revenue into net earnings. This strengthening of the net profit margin is a key indicator of overall financial health and profitability. The consistent improvement across gross, operating, and net profit margins suggests a positive trend in the Company's earnings generation capacity and overall financial efficiency. These margin expansions provide a more robust foundation for future profitability and cash flow generation, which are important considerations in our credit assessment.

The Company has started to fiberize towers in Pakistan, which will be imperative for 5G technology and to cater the increasing user base. Curently 1000 towers have been fiberized. For this purpose, the management has availed an Infrazamin credit guarantee backed long-term loan of PKR 2.1bln from HBL currently loan amount restricted to 1,038mln.

The Company demonstrated enhanced efficiency in its working capital management during CY24. Inventory days improved to 19 days from 22 days in the previous year, indicating a quicker turnover of stock and potentially reduced holding costs. Similarly, the Company achieved a reduction in trade receivable days, which stood at 68 days in CY24 compared to 72 days in CY23, suggesting more effective collection processes. Consequently, the gross working capital cycle shortened to 87 days in CY24 from 94 days in CY23, reflecting an overall improvement in the time taken to convert inventory and receivables into cash. Furthermore, payable days also decreased to 128 days in CY24 from 144 days in CY23, indicating a potentially faster payment cycle to suppliers. The net working capital days remained negative but moved from -50 days in CY23 to -41 days in CY24. While a negative net working capital cycle can be a sign of efficient cash management, the slight increase warrants monitoring to ensure it is not indicative of undue pressure on supplier payments. Overall, the improvements in inventory days and trade receivable days contributed positively to a more efficient working capital cycle for the Company.

The Company exhibited a notable improvement in its funds from continuing operations (FCFO), which increased to PKR 828 million in CY24 from PKR 577 million in the prior year. This strengthening in FCFO provides a larger pool of internally generated funds available to service debt obligations and fund operational needs. Despite an increase in finance costs to PKR 414 million in CY24 (CY23: PKR 330 million), the Company's FCFO to finance cost coverage improved to 2.2x in CY24 from 1.8x in CY23. This indicates an enhanced ability to meet its interest expenses from its core operating cash flows. The total coverage ratio also showed positive momentum, rising to 0.4x in CY24 from 0.3x in CY23, suggesting a slightly improved capacity to cover total debt obligations with its FCFO. The increase in FCFO more than offset the rise in finance costs, resulting in stronger debt service coverage metrics for the Company.

The Company maintains a conservative capital structure, evidenced by a leverage ratio of 21%. This prudent approach to financing is further highlighted by a reduction in overall borrowings, which stood at PKR 1.7 billion in CY24 compared to PKR 2.0 billion in the prior year. Notably, the composition of the Company's debt portfolio indicates a low reliance on short-term financing, with only 2% of total borrowings categorized as short-term. This emphasis on longer-term funding sources mitigates potential refinancing risks and supports a stable financial foundation. The combination of a low leverage ratio and a predominantly long-term debt profile suggests a measured and sustainable approach to capital management.