Infralectric booked Rs282 million of profit while its operations used Rs2.7 billion of cash

Infralectric reported a profit of Rs282 million for the year to 30 June 2026. In the same year its operations used Rs2.72 billion of cash. That gap is the business model. The company builds solar and battery plants on mobile phone towers, owns them, and rents the energy to the network operator over seven years, but it books the lease income when a site is finished and collects the cash slowly afterwards. The figures come from the audited accounts summarised in the rating report the credit agency PACRA published on 15 October 2026.

Infralectric was founded in 2021 and sells energy as a service. Under tripartite agreements between the company, a mobile network operator and a financial institution, it owns the energy assets at a tower site and charges the operator a fixed price under a seven year contract. Its customers are Telenor Pakistan and Ufone. PACRA puts Pakistan's tower sites at more than 50,000, heavily dependent on diesel, with energy accounting for 20 to 30 percent of an operator's operating costs. Infralectric says it has solarised 3,036 towers for the two operators, about 6 percent of that base (3,036 divided by 50,000).

Profit that arrives before the cash

PACRA states that lease revenue is recognised upfront when a site is completed. Sales were therefore Rs18 million in the year to June 2024, Rs2,756 million in 2025 and Rs2,078 million in 2026, a fall of 24.6 percent. They track how many sites were finished in a year, not the size of the installed base. Total assets rose from Rs714 million in 2024 to Rs3,804 million in 2025 and Rs9,686 million in 2026.

Margins rose as sales fell. Gross profit was Rs549 million in 2026 against Rs424 million in 2025, lifting gross margin from 15.4 to 26.4 percent. Operating profit was Rs456 million, but profit before interest and tax was Rs955 million, so Rs499 million, or 52 percent, arose below the operating line (499 divided by 955). The report gives no breakdown. It does say that interest income on the lease portfolio broadly offsets the cost of bank borrowing. That is income earned on paper over the life of a lease, not cash in hand.

The cash flow statement shows the other side. Free cash flow from operations, PACRA's measure before working capital and financing, was minus Rs1,436 million in 2026 and minus Rs2,337 million in 2025. After working capital, net cash from operating activities was minus Rs2,721 million and minus Rs2,793 million. Over the two years the company used Rs5,514 million in its operations while reporting profits of Rs482 million (282 plus 200), or about Rs11 of operating cash out for every rupee of profit. The report does not split the outflow, but a company that pays for a plant up front and recovers the cost through rent over seven years will show cash leaving long before it returns.

Lenders and shareholders paid for it. Net cash from financing was Rs2,296 million in 2025 and Rs4,447 million in 2026, a total of Rs6,743 million. Between June 2024 and June 2026 borrowings rose from Rs320 million to Rs6,477 million and shareholders' equity from Rs202 million to Rs2,273 million. Debt to capital stood at 74.1 percent, up from 71.5 percent a year earlier. A current ratio of 10.1, up from 6.3, shows that money raised ahead of site completion was still sitting in current assets: the second sukuk tranche was issued on 30 June, the last day of the financial year. Trade receivables were only Rs36 million. The money owed by the operators sits in long term lease receivables, which PACRA says cover borrowings about 1.3 times on a gross contracted basis.

How the sukuk is built

The financing is a privately placed Shariah compliant green sukuk of up to Rs3 billion, which PACRA describes as Pakistan's first telecom green sukuk. Rs2,976 million has been drawn and Rs24 million is undrawn. Tranche I of Rs670 million was issued on 22 May 2026 to finance 502 Telenor sites. Tranche II of Rs2,306 million was issued on 30 June 2026 to finance 658 Ufone sites.

Divide the money by the sites and the two tranches differ. Tranche I works out at about Rs1.33 million a site (670 divided by 502) and Tranche II at about Rs3.50 million (2,306 divided by 658), roughly 2.6 times as much. Across both the average is about Rs2.57 million (2,976 divided by 1,160). The sukuk is not the whole cost of a site, because each drawdown requires a 20 percent equity contribution, but that rule applies to both tranches and does not explain the gap. The report does not say what drives it.

Pricing is six month KIBOR plus 75 basis points, reset every six months, with an indicative profit rate of about 13.28 percent for Tranche I and 12.57 percent for Tranche II. On the amounts drawn the sukuk costs about Rs379 million a year in profit (Rs670 million at 13.28 percent plus Rs2,306 million at 12.57 percent), before the guarantee fee and any principal. That is about 83 percent of the Rs456 million operating profit reported for 2026. Because the money was drawn only weeks before year end, the 2026 accounts carry little of this cost, so 2027 is the first full year to measure it against. Each tranche runs about 7.5 years: six months of profit only payments, then 14 semi annual principal instalments, the first due 12 months after issue. Spread evenly, the Rs2,976 million would mean instalments averaging about Rs213 million.

Security is layered. Investors hold an exclusive first charge with a 20 percent margin, an assignment of receivables, liens on ring fenced accounts and a finance service reserve account built up to the size of the peak instalment by month 18. On top sits a guarantee from InfraZamin Pakistan covering 100 percent of principal up to Rs3 billion, reducing as the sukuk is repaid. InfraZamin is rated AAA by PACRA and backed by InfraCo Asia, GuarantCo and Karandaaz Pakistan. The structure allows a cure period of up to 12 months after a missed payment, and acceleration needs approval from at least 70 percent of sukuk holders. PACRA gave the sukuk an initial AAA rating on 15 October 2026, with a stable outlook, after a preliminary AAA on 28 October 2025. The rating therefore rests on the guarantor as much as on the company. The minimum investment is Rs5,000, issued in book entry form through the Central Depository Company.

Renting a plant versus selling one

The model differs from that of Reon Energy, a solar contractor that PACRA also rates. Reon is paid as it builds, and its rating report shows borrowings at 40.6 percent of capital at the end of December 2025 against Infralectric's 74.1 percent at the end of June 2026. The two dates are six months apart, but both ratios are borrowings over borrowings plus equity. The gap reflects the choice: a contractor is paid for the plant, while Infralectric lends the plant to its customer and waits for seven years of rent.

The risks PACRA lists follow from that choice. Customer concentration comes first: PTCL's acquisition of Telenor Pakistan places both of Infralectric's customers under one parent. Contracts are fixed price, so the company bears the risk of rising equipment costs and of exchange rate moves on imported kit. The operators could solarise directly and stop renting. Sites still under deployment carry delivery risk. Chief executive and cofounder Muhammad Bilal Qureshi holds 48 percent, Abdul Rehman Atif Qureshi 32 percent, SC Technologies Global 15 percent and cofounder Ayla Majid 5 percent, and PACRA rates key person risk as moderate.

There is also a timing mismatch. The sukuk tranches repay over about 7.5 years while the customer contracts last seven, and the report does not say when each contract's term starts. If it runs from site completion, the sukuk outlasts the rent it relies on, and the reserve account and the guarantee carry the difference.

Who gains is fairly clear. Telecom operators swap a volatile diesel bill for a fixed one. Sukuk holders are protected by the guarantee for the first Rs3 billion. Infralectric's founders keep control while using other people's money to build assets. The exposed parties, if the plants underperform or an operator stops paying, are the guarantor and the equity holders. The first test comes in May 2027, when principal on Tranche I falls due 12 months after its 22 May issue date, followed by Tranche II after 30 June 2027, alongside accounts for the year to June 2027 that will show whether operating cash flow has turned.