SECP puts Khaadi IPO Prospectus under lens

November 10, 2026 (MLN): Khaadi Pakistan’s IPO is on the Securities and Exchange Commission of Pakistan’s (SECP) radar, with the regulator raising a series of questions on the draft prospectus, people familiar with the matter told Mettis Global.

The scrutiny comes at a sensitive time. Only weeks ago, SE Fruits and Vegetable withdrew its IPO and returned investors’ money, leaving the regulator that cleared its prospectus with questions of its own to answer. The episode seems to have prompted the SECP to look inward at how that offering was handled and to make senior-level changes.

Whatever the reasons, prospectuses now coming through seem to be getting closer attention, and Khaadi’s appears to be one of them.

An internal review of how the SE Fruits offering was handled is understood to be under way, and there appears to have been a reshuffle at the senior level of the division that oversaw it. The result, it seems, is a more careful approach to the prospectuses now coming through, and Khaadi appears to be among the first to feel it.

A gain that could decide a lock-in

The central question seems to be how Khaadi treats a property revaluation gain. In CY25, the company changed how it accounts for investment property, moving from cost to fair value, and recorded a fair-value gain of Rs3,318 million in its audited accounts.

The company appears to regard the gain as arising from its operations; the regulator seems not to agree. That matters because, without the gain, the year’s profit would turn into a loss.

Under Regulation 5(1) of the Public Offering Regulations, 2017, sponsors of a loss-making company must retain their entire shareholding for at least two years from the last date of public subscription. Weaves Corporation Limited, Khaadi’s sole shareholder, will own 80% of the company after the issue. If the gain is not treated as operating income, none of those shares could be sold for two years.

What Rs12.40 really buys

Khaadi’s shares have a face value of Rs0.125. A company is free to set its face value, but the choice changes how the premium looks. A Rs10 share sold at Rs15 carries a 50% premium. At the Rs12.40 floor price, a Rs0.125 Khaadi share carries a premium of Rs12.275, or about 9,800% of face value.

According to the sources, the concern seems to be that ordinary investors may think they are paying a modest premium when it is far higher. The regulator wants the face value stated alongside the issue price wherever it appears in the prospectus.

Paying the group

The rent and management fees Khaadi pays to group companies also appear to have drawn questions. According to the prospectus, outlet rent paid to associated companies was Rs1,724 million in CY25, and management fees and reimbursement paid to Weaves Corporation were Rs948 million.

What our review of the draft found

In October, Mettis Global submitted public comments to PSX on the 293-page draft, raising questions that go beyond the regulator’s list. More than three weeks later, those questions remain unanswered.

Where the money goes. All 500 million shares in the issue are new, raising about Rs6.2 billion at the floor. Section 4 explains only the IPO’s Rs3.1 billion: Rs1.76 billion to repay “bridge financing” and Rs1.34 billion for four stores. The use of the Rs3.1 billion Pre-IPO money is not stated.

Yet the projected cash flow shows Rs3.1 billion repaid to Weaves Corporation in CY26, exactly matching the Pre-IPO proceeds, and Rs8 billion in total over three years. That equals the amount owed to the parent for the brand.

The “bridge financing” turns out to be ordinary running finance, drawn in the same half-year that Khaadi paid Weaves a Rs 1.65 billion dividend. On these numbers, only about 22% of the fresh capital at the floor price goes into new stores.

A licence, not a brand. Khaadi has booked the Rs8 billion as a purchase of brand rights, but the prospectus’s own risk factors state that all IP rights stay with Weaves.

Khaadi gets an exclusive right to use the trademarks in Pakistan. The Rs49.9 billion brand valuation was commissioned by the seller, and it is twice the Rs24.8 billion pre-money value of the entire company at the floor price.

Related parties. About 55% of Khaadi’s supply comes from Texmark, which the audited accounts classify as a close family member’s company. The prospectus does not disclose that relationship. Khaadi also advanced money interest-free to Weaves, up to Rs5.17 billion at the peak in CY24, while borrowing from banks at market rates. The land at SITE, worth Rs2.4 billion or 54% of investment property, is still in the CEO’s name.

Growth and valuation. The draft describes first-half CY26 revenue growth as “36% annualised”. The year-on-year figure was 27%, and domestic sales grew only 9.2%, with the rest coming from exports to group companies. In the valuation, 83% of enterprise value rests on the terminal value. The draft also offers no comparison with listed peers.

Why it matters for investors

For investors, closer scrutiny is good news, whichever way the individual questions are settled. SE Fruits showed what happens when problems surface after money has been raised. Here, the questions are being asked before a single rupee is collected from the public.

If the regulator’s view on the revaluation gain holds, the sponsor stays fully invested for two years and shares the same risk as new shareholders. Clearer disclosure on the face value, on payments to the group and on any legal proceedings involving management would let investors price those risks themselves rather than discover them later.

A prospectus that answers these questions would deserve more trust than one that has been rushed through in two working days. For a listing as high-profile as Khaadi’s, that trust matters to the wider market as much as to the company.

What others have reported

ProPakistani reported on November 9 that the SECP has also sought details of Khaadi International’s franchise operations and its experiential stores in different cities, a justification for the face value, and an explanation of how the company arrived at its proposed valuation. It also reported that the audited accounts for December 2025 show a loss of around Rs1.5 billion, offset by revaluation gains.

The same report pointed to further gaps in the draft:

• the valuation report and assumptions behind the property revaluation
• the basis on which Grant Thornton valued Khaadi’s intellectual property rights, and how the share premium was set
• the investment planned for each new outlet and the revenue expected from it, and how the stores opened in the first half of 2026 have performed
• the safeguards minority shareholders would have if the sponsors, with their voting control, changed how the IPO money is used

On the Rs8 billion purchase of rights from the parent, the prospectus cites a valuation by GT while the audited accounts describe a price negotiated between the parties. It suggested that alternative structures, such as a joint venture in which the parent contributes the rights and Khaadi the funding, could be examined.

What next

Sources told Mettis Global that exchanges between the company, its consultant and the regulator are continuing.

The IPO timetable could shift, but no decision appears to have been taken on Khaadi’s listing so far.

Also, the closer scrutiny does not yet appear to be reflected in formal changes. The regulator seems interested in strengthening the review process, though this has not yet translated into revised regulations or new internal procedures for examining prospectuses before approval. 

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