Zarea Limited seeks PSX listing, aims to raise over Rs1bn through IPO

Zarea Limited has submitted its application for listing on the main board of the Pakistan Stock Exchange (PSX), proposing to generate at least Rs1 billion through the initial public offering (IPO) of 62.50 million shares, starting at Rs16 each. 

According to a PSX notice, Topline Securities Limited and Growth Securities Limited are the joint lead managers to the issue.

Zarea Limited is a business-to-business e-commerce platform focused on construction materials including cement and steel, alongside agricultural biomass. 

The company is set to broaden its inventory to incorporate commodities such as coal, chemicals, grains, sugar, fertilizers, and cotton.

The entire issue will be offered through the Book Building at a floor price of PKR 16/- per share (including a premium of PKR 15/- per share) with a maximum price band of up to 40% i.e., PKR 22.4 per share.

The bidders shall be allowed to place bids for 100% of the Issue size and the Strike Price shall be the price at which 100% of the Issue is subscribed. 

However, the successful bidders shall be provisionally allotted only 75% of the Issue size i.e., 46,875,000 shares and the remaining 25% i.e., 15,625,000 shares shall be offered to the retail investors through the general public portion. 

In case of the retail portion of the Issue remains unsubscribed, the unsubscribed shares will be allotted to the successful bidders on pro-rata basis. 

According to a news report, the capital raised from the IPO will be invested in expanding ZL’s IT capabilities and customer base. With the pricing potentially increasing by up to 40% through a Dutch auction, reaching up to Rs22.4 per share, Zarea could elevate its IPO intake to Rs1.4 billion.

This IPO would mark the sixth for PSX’s primary trading board in 2024, a year that has already seen Rs8 billion raised from five previous IPOs. 

A separate release from ZL points out that the IPO shares are priced at a price-to-earnings ratio of 10.93x based on the previous fiscal year’s earnings as of June 30, 2024. This represents a substantial discount—approximately 52%—relative to the technology sector’s average P/E ratio of 22.99x on the PSX.

For FY24, Zarea Limited reported a significant 144% surge in revenue, climbing to Rs281 million from Rs115 million in the preceding fiscal year, with after-tax profits soaring to Rs292.8 million from Rs81.3 million in FY23.