Zarea Ltd seeks to raise Rs1bn through IPO

LAHORE: Zarea Limited, Pakistan’s e-commerce marketplace for commodities, has applied for listing on the Pakistan Stock Exchange (PSX). The company aims to raise at least Rs1 billion by offering 62.5 million shares to institutional, high-net-worth, and individual investors, subject to regulatory approval.

The funds will support Zarea’s strategic expansion in technology, logistics, infrastructure, and marketing as it seeks to grow its customer base and drive further growth in Pakistan’s digital commerce sector.

Zarea’s Ali Alam Qamar shared that Zarea is a leading digital technology company pioneering the digitalisation of Pakistan’s B2B commodity trading market. The company’s proprietary platform allows buyers to access competitive prices and track market trends through a user-friendly interface. Zarea’s focus on digital transformation across logistics, storage, credit, and data analytics enhances user experience, drives customer retention, and strengthens its market presence in the digital economy.

The IPO is being offered at a price-to-earnings (P/E) multiple of 10.93x with a floor price of Rs16 per ordinary share, based on trailing twelve months (TTM) earnings as of June 30, 2024. This represents a significant discount of approximately 52 per cent compared to the industry average P/E of 22.99x for the technology sector on the PSX, making it an attractive entry point for investors, with anticipated strong demand for the shares.

Through this IPO, Zarea plans to diversify its product portfolio by expanding beyond core commodities like cement, steel, building materials, and agri-biomass to include coal, chemicals, grains, pulses, fertilizers, cotton, yarn, sugar and agricultural perishables. This growth strategy aligns with the company’s vision of meeting Pakistan’s rising demand for efficient, technology-driven trading solutions, presenting a unique opportunity for investors to capitalize on the country’s growing digital economy.

For investors, Zarea’s scalable business model and diversified offerings provide strong long-term growth potential. According to the prospectus, IPO funds will finance Zarea’s working capital needs, enhance operational scale, expand logistics and upgrade its technology infrastructure.

Zarea reported impressive financial results for the fiscal year ending June 2024, with revenue rising to Rs281 million from Rs115 million in FY23 and profit after tax reaching Rs292.8 million, up from Rs81.3 million in FY23. This growth underscores the company’s role as a key player in Pakistan’s digital economy.

The entire issue of 62.5 million shares will be offered through the book-building method, allowing bids for the full issue size. Successful bidders will receive a provisional allotment of 75 per cent of the shares (46.875 million), with the remaining 25 per cent (15.625 million) offered to retail investors through a general public offering.

IPO shares will be offered at a minimum price of Rs16 per share, with a potential increase of up to 40 per cent to Rs22.4 per share in a two-day Dutch auction (book-building) process. The final strike price will be determined during the auction, with dates to be announced.