Zarea Limited plans to raise Rs3 billion through a rights issue to repay its short-term Sukuk and support the expansion of its agricultural commodity trading business. The proposed share offering will provide funds for the company’s financing obligations as well as additional working capital required to support projected sales growth and increased activity across its online agricultural marketplace.
The company’s board approved the rights issue on October 30, 2026, while the draft offer document was placed on the company’s website and the Pakistan Stock Exchange (PSX) on November 2. Zarea will issue 120 million ordinary shares with a face value of Rs1 each at an offer price of Rs25 per share, including a premium of Rs24. The proposed entitlement ratio is 16 right shares for every 35 shares held, representing approximately 45.71% of the company’s existing paid-up capital of 262.5 million shares.
The offer price represents a 29.30% discount to Zarea’s closing share price of Rs35.36 on October 23 and a 40.82% discount to its six-month average closing price of Rs42.24. The theoretical ex-right price has been calculated at Rs32.11, while the theoretical value of each right share stands at Rs7.11. The company has not yet announced the book closure and subscription dates. The offer document will remain valid for 60 days from the final date for payment of the subscription amount.
Zarea requires approximately Rs3.37 billion in additional funding, comprising Rs2 billion for repayment of its Sukuk principal and Rs1.37 billion for additional working capital. The rights issue is expected to generate net proceeds of Rs2.95 billion, covering around 87.56% of the funding requirement. The remaining Rs419.44 million, or 12.44%, will be met through internally generated cash.
Of the Rs3 billion gross proceeds, Rs2 billion, representing 66.66%, will be allocated to Sukuk principal repayment. Another Rs951.5 million, or 31.72%, will be directed towards additional working capital, while the remaining Rs48.5 million, equivalent to 1.62%, will cover issue-related expenses.
The Sukuk being repaid was privately placed on October 6, 2026, for a six-month period. The unsecured instrument carries a profit rate of six-month Karachi Interbank Offered Rate (KIBOR) plus 2.50%, with Bank Islami Pakistan Limited serving as its investment agent. The principal is scheduled to be repaid on April 5, 2027, while the company expects to pay approximately Rs148 million in profit through internal resources.
Nine certificate holders subscribed to the Sukuk. These include Alfalah Islamic Income Growth Fund and Alfalah Islamic Money Market Fund, each contributing Rs300 million. CDC Trustee Pak Qatar Asset Allocation Plan IIA subscribed Rs290 million, while CDC Trustee Pak Qatar Income Plan invested Rs210 million. Servis Long March Tyres Private Limited Staff Provident Trust contributed Rs100 million. The remaining four holders, Mahana Islamic Cash Plan, Alfalah GHP Income Multiplier Fund, Alfalah Islamic Amdani Fund and CDC Trustee Pak Qatar Cash Plan, subscribed Rs200 million each.
The working capital allocation is intended to finance agricultural commodity procurement, supplier advances, inventory requirements and receivables. Zarea expects to utilise the full Rs951.5 million by June 30, 2027. The funding requirement is linked to projected business expansion, with the company forecasting sales of Rs4.59 billion in FY27 compared with Rs2.76 billion in FY26.
Platform fee revenue is projected to increase by 25% to Rs567.55 million, while agricultural commodity sales are expected to reach Rs4.03 billion. To support this growth, Zarea anticipates that net working capital will rise to Rs2.19 billion from Rs815.5 million at the end of FY26.
The company also expects its net operating cycle to increase to approximately 200 days, compared with around 156 days in FY26. The projected cycle includes 65 days of receivables and 175 days of stocks and advances, partly offset by 40 days of creditors. Zarea has linked the longer operating cycle to advance procurement, improved inventory availability and the provision of credit support to customers. These requirements are expected to increase the amount of capital tied up in day-to-day operations as the business expands.
The rights issue will be supported by commitments from existing sponsors and directors as well as underwriting arrangements. Sponsors and directors have committed to subscribe to 60 million shares worth Rs1.5 billion, compared with their combined entitlement of 91.43 million shares. Chief Executive Officer Ali Alam Qamar has committed to subscribe to 18,399,987 shares valued at approximately Rs460 million. Goldfinger (Private) Limited has committed to 41,142,870 shares worth around Rs1.03 billion, while Chairperson Misbah Momin has committed to 457,143 shares valued at approximately Rs11.4 million.
The remaining Rs1.5 billion of the issue will be underwritten by Dawood Equities, Adam Securities, Pak Libya Holding Company and K-Trade Securities. Dawood Equities will underwrite Rs1 billion, while Adam Securities will cover Rs100 million. Pak Libya Holding Company and K-Trade Securities will each underwrite Rs200 million. According to the company, none of these underwriters is an associated company of the issuer.
Following completion of the issue, Zarea’s paid-up capital is expected to increase from 262.5 million shares to 382.5 million shares. Its net assets are projected to rise to Rs6.34 billion from Rs3.39 billion. The company’s book value per share is expected to increase from Rs12.92 to Rs16.58, while its current ratio is projected to improve from 2.97 times to 18.97 times. The debt-to-equity ratio is expected to decline from 0.41 times to 0.05 times.
The estimated Rs48.5 million in issue expenses includes Rs5 million for the consultant to the issue, Rs14.25 million each for underwriting and maximum take-up commission, Rs4.5 million for the banker to the issue, Rs4.5 million for Central Depository Company and PSX charges, and Rs6 million for miscellaneous costs. United Bank Limited will serve as banker to the issue, while K-Trade Securities has been appointed consultant. Fractional share entitlements will be consolidated and sold, with the resulting net proceeds distributed among entitled shareholders in proportion to their holdings.
Zarea operates an online marketplace and is also directly involved in agricultural commodity trading. Its subsidiaries include Zarea Agri-Tech, in which it holds a 75% stake, and Zarea Commerce – FZCO, which is wholly owned. The company’s financial performance improved considerably in FY26, with sales more than doubling to Rs2.76 billion from Rs1.34 billion in the previous year. Net profit increased to Rs1.38 billion from Rs671.1 million, while earnings per share rose to Rs5.25 from Rs3.04.
Zarea also declared a dividend of Re1 per share for FY26. The company was listed on the Pakistan Stock Exchange on February 28, 2025, following an initial public offering of 62.5 million shares at prices of Rs16 and Rs16.50. The proposed rights issue represents a new financing step as the company seeks to meet its Sukuk repayment obligation while securing the working capital needed for its projected expansion in agricultural commodity trading.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.