Is Zarea Limited the next big tech stock in Pakistan?

Key takeaways

• Zarea Limited (ZAL) is launching its IPO, offering 62.5 million shares (23.81% post-IPO equity) at a floor price of PKR 16 per share, targeting a total transaction size of PKR 1.0 billion.
• ZAL is Pakistan’s first digital B2B marketplace for cement, steel, agriculture biomass, and construction materials, with a strong focus on digital transformation.
• Revenue primarily comes from platform usage fees (64%) and agricultural biomass trading (36%), allowing for diversified income streams.
• IPO funds will be used to expand working capital, launch an in-house logistics operation, integrate AI into its platform, and add seven new commodities.
• Zarea benefits from a 10-year tax holiday under the Special Technology Zone Authority License, boosting profitability.
• With strong revenue growth projections, the company is expected to generate PKR 781 million in FY25, reflecting a 77% YoY increase.

Zarea Limited: transforming Pakistan’s B2B e-commerce market

Zarea Limited (ZAL) is Pakistan’s first digital B2B marketplace, connecting buyers and sellers of cement, steel, agriculture biomass, and construction materials. Established in 2020, Zarea has rapidly grown into a leading platform, offering seamless transactions through its website and mobile app.

Now, ZAL is going public, offering 62.5 million shares (23.81% of post-IPO capital) at a floor price of PKR 16 per share, with a potential ceiling price of PKR 19.1 per share. The company aims to raise PKR 1.0 billion to fund expansion, logistics, and technology advancements.

Why Zarea stands out: A High-growth digital platform

1. Strong revenue model with diversified income streams

Zarea’s revenue model is highly scalable, with earnings coming from:

• Platform Usage Fees (64%) – Charged on transactions (ranging from 1-10%).
• Agricultural Biomass Trading (36%) – Zarea purchases biomass in peak season and sells it during off-peak periods for higher margins.

This unique approach allows the company to benefit from both digital commissions and commodity trading profits.

2. Expansion plans: where IPO funds will be used?

Zarea’s IPO proceeds will be allocated to:

• Increasing working capital to secure key commodities at lower prices.
• Launching in-house logistics (starting with nine trucks in FY26) to improve delivery times and customer satisfaction.
• Expanding its digital platform with AI-powered business optimization.
• Adding seven new commodities, including coal, sugar, chemicals, textiles, grains, fertilizers, and perishable agricultural products.
• Investing in marketing and branding to expand its customer base.

3. High growth potential in Pakistan’s digital commerce sector

Pakistan’s B2B commerce market is shifting online, fueled by increasing internet penetration and digital adoption. Zarea has seen:

• A rising customer retention rate, from 33% in FY22 to 56% in FY24.
• Projected transaction volume growth of 108% YoY in FY25, with over 13,500 transactions expected.
• Revenue projections of PKR 781 million in FY25, a 77% YoY increase, growing to PKR 1,939 million by FY27.

4. 10-year tax holiday & cost advantages

Zarea enjoys a 10-year tax exemption (2023-2034) under the Special Technology Zone Authority License, allowing it to reinvest profits and scale quickly. This provides a significant cost advantage over traditional competitors.

Investment outlook: should you subscribe to Zarea’s IPO?

Analysts recommend subscribing up to PKR 19.1 per share, given the company’s strong growth prospects and discounted valuation compared to peers. Even at PKR 19.1 per share, Zarea trades at a 52% discount (TTM EPS) to the industry average P/E of 21.8x.

With rapid revenue growth, expanding operations, and a dominant position in digital B2B commerce, Zarea presents a compelling investment opportunity in Pakistan’s tech-driven economy.

Zarea Limited’s IPO offers investors a chance to be part of Pakistan’s growing digital B2B sector. With a strong revenue model, AI-driven expansion, and a tax-free advantage, the company is set for significant growth in the coming years.

For investors looking for high-growth tech opportunities, Zarea’s IPO is one to watch closely.

Source: Foundation Securities