Zarea plans Rs3bn rights issue to repay Sukuk, expand agri business

November 02, 2026 (MLN): A Rs3 billion rights issue priced at a 29.30% discount to the market will fund the repayment of a Rs2bn short-term Sukuk and expansion of the agri-commodity trading business of Zarea Limited.

The board approved the issue on October 30, 2026, and the draft offer document was placed on the company and PSX websites on November 2, 2026. Public comments are not sought.

The company will issue 120 million ordinary shares of Rs1 face value at Rs25 each, including a premium of Rs24 per share. The ratio is 16 right shares for every 35 shares held, equal to about 45.71% of the existing paid-up capital of 262.5 million shares,according to the company's statement issued today.

The offer price is 29.30% below the October 23 closing price of Rs35.36 and 40.82% below the six-month average closing price of Rs42.24. The theoretical ex-right price is Rs32.11 and the theoretical value per right share is Rs7.11.

Book closure and subscription dates are yet to be fixed. The offer document will be valid for 60 days from the last day of payment of the subscription amount.

The company needs Rs3.37bn in incremental funding: Rs1.37bn of additional working capital and Rs2bn for Sukuk principal. Net proceeds of Rs2.95bn will cover 87.56% of this, with internal cash generation of Rs419.44m (12.44%) meeting the rest.

The Rs2bn privately placed short-term Sukuk was issued on October 6, 2026 for six months at six-month KIBOR plus 2.50% and is unsecured, with Bank Islami Pakistan Limited as investment agent. It will be repaid on April 5, 2027. Profit of about Rs148m will be paid from internal sources.

Nine certificate holders subscribed, including Alfalah Islamic Income Growth Fund and Alfalah Islamic Money Market Fund (Rs300m each), CDC Trustee Pak Qatar Asset Allocation Plan IIA (Rs290m), CDC Trustee Pak Qatar Income Plan (Rs210m) and Servis Long March Tyres Private Limited Staff Provident Trust (Rs100m).

The remaining holders are Mahana Islamic Cash Plan, Alfalah GHP Income Multiplier Fund, Alfalah Islamic Amdani Fund and CDC Trustee Pak Qatar Cash Plan, at Rs200m each. The remaining Rs951.5m of net proceeds will go into commodity procurement, supplier advances, inventory and receivables, with full utilization planned by June 30, 2027.

The working capital need follows projected sales growth from Rs2.76bn in FY26 to Rs4.59bn in FY27. Platform fee revenue is projected to rise 25% to Rs567.55m, and agri-commodity sales to Rs4.03bn.

Net working capital is projected at Rs2.19bn, against Rs815.5m at the end of FY26. The net operating cycle is planned at 200 days (65 days of receivables and 175 days of stocks and advances, less 40 days of creditors), up from about 156 days in FY26.

The company links the longer cycle to advance procurement, greater inventory availability and customer credit support.

Sponsors and directors have committed to subscribe to 60 million shares worth Rs1.5bn, against their aggregate entitlement of 91.43 million shares.

The remaining Rs1.5bn is underwritten by Dawood Equities (Rs1bn), Adam Securities (Rs100m), Pak Libya Holding Company (Rs200m) and K-Trade Securities (Rs200m), none of which is an associated company of the issuer.

The issue will lift paid-up capital to 382.5 million shares from 262.5 million and net assets to Rs6.34bn from Rs3.39bn. Book value per share will rise to Rs16.58 from Rs12.92, the current ratio to 18.97 times from 2.97 times, and the debt-equity ratio will fall to 0.05 times from 0.41 times.

Issue expenses are estimated at Rs48.5m, including Rs5m for the consultant to the issue, Rs14.25m each for underwriting and maximum take-up commission, Rs4.5m for the banker to the issue, Rs4.5m for CDC and PSX charges and Rs6m for miscellaneous costs.

United Bank Limited is banker to the issue and K-Trade Securities is consultant. Fractional entitlements will be consolidated and sold, with net proceeds paid to entitled shareholders in proportion.

The company runs an online marketplace and trades agricultural commodities directly, and its subsidiaries are Zarea Agri-Tech (75%) and Zarea Commerce - FZCO (100%). Sales more than doubled to Rs2.76bn in FY26 from Rs1.34bn a year earlier, while net profit rose to Rs1.38bn from Rs671.1m and earnings per share to Rs5.25 from Rs3.04.

A dividend of Re1 per share was declared for the year. The shares were listed on PSX on February 28, 2025 after an IPO of 62.5 million shares at Rs16 and Rs16.50.

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