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Zarea Limited’s IPO: A Major Step Towards Digital Transformation
Zarea Limited (ZL), a business-to-business (B2B) e-commerce platform, applied for listing on the Pakistan Stock Exchange (PSX) on Monday. The company aims to raise at least Rs1 billion through an initial public offering (IPO) of 62.50 million shares, priced at a minimum of Rs16 per share. This offering is open to corporate investors, affluent individuals, and retail investors, presenting an exciting opportunity for those interested in Pakistan’s growing digital economy.
According to the prospectus available on the PSX website, Zarea Limited specialises in providing construction materials, including cement, steel, and agricultural biomass. As part of its growth strategy, the company plans to expand its product offerings by adding coal, chemicals, grains, pulses, sugar, fertilizers, cotton, yarn, and other agricultural perishables.
Expanding with a Strong Technology Focus
The proceeds from the IPO will be primarily used to enhance ZL’s IT infrastructure and grow its customer base. Under the current regulations, the share price could increase by up to 40% through a Dutch auction process, reaching a maximum of Rs22.4 per share. This could boost the total raised funds to Rs1.4 billion, enabling ZL to invest heavily in its technology platform.
The company has developed a proprietary platform that allows buyers to purchase goods at competitive rates and track prices through an easy-to-use interface. Zarea’s mission is to revolutionize the B2B commodity marketplace by digitising the procurement process and offering additional services such as logistics, storage, credit, and data analytics.
Key Players in the Offering
Topline Securities and Growth Securities are acting as joint consultants and book runners for the IPO, which notably marks the sixth listing on the PSX’s main trading platform in 2024. In comparison, the previous five IPOs collectively raised Rs8 billion, further signaling a growing investor interest and improved economic conditions in Pakistan.
Moreover, the PSX has seen impressive performance this year, with the KSE-100 Index rising by 42.5% to over 90,000 points, reflecting strong investor sentiment. Additionally, the top 100 companies in the KSE-100 Index reported a 24.4% increase in profitability, reaching a record high of Rs1.6 trillion in FY24.
Impressive Financial Performance
Zarea Limited has demonstrated strong financial growth over the past year. For the fiscal year ending June 30, 2024, the company reported a remarkable 144% increase in revenue, reaching Rs281 million compared to Rs115 million in FY23. Additionally, profit after tax surged to Rs292.8 million, a significant increase from Rs81.3 million in the previous year.
At the floor price of Rs16 per share, the shares are priced at a price-to-earnings (P/E) multiple of 10.93x, based on the trailing twelve months (TTM) earnings as of June 30, 2024. This represents a notable discount of around 52% compared to the average P/E of 22.99x in the technology sector on the PSX, making ZL’s IPO an attractive opportunity for investors.
