PACRA Assigns Preliminary Rating to Zarea Limited - PPSTS - PKR 1bln - TBI

Zarea Limited (ZAL) is a tech-enabled B2B e-commerce platform digitizing Pakistan’s industrial and agricultural supply chains. By disintermediating traditional channels, the Company has executed over 17,000 orders across 50+ cities and secured long-term offtake agreements with blue-chip corporates. Its agile microservices architecture, real-time tracking, and proprietary 10-year commodity data repository underpin customer stickiness. ZAL is also the country’s first structured entrant in the agri-biomass segment, positioning it to capture a rapidly formalizing market. Governance is anchored by a seven-member board and complemented by professionals with deep experience in government, banking, and industry. Institutionalized oversight across finance, technology, supply chain, and marketing enhances execution capacity. Financially, ZAL has exhibited exceptional growth, with revenues rising ~173% YoY to PKR 805 million and net profit up ~132% to PKR 454 million (9MFY25). The Company maintains an equity of PKR 2.06 billion. Its 10-year STZA tax exemption further strengthens cash flow and interest coverage. ZAL has fully met its working capital requirements through internal cash generation. In order to support scale-up and diversification, the Company plans to issue a privately placed, rated, unsecured short-term Sukuk under a Musharakah (Shirkat-ul-Aqd) structure. ZAL has expressly undertaken not to incur additional debt during the Sukuk’s tenor. The instrument benefits from adequate structural protections. Under the Musharakah structure, investors and the obligor jointly participate in the commercial venture, creating greater alignment of risk and return. Proceeds are contractually earmarked for working capital deployment in agri-biomass procurement, specifically corn cob, rice husk, paddy and sesame straw, across four procurement hubs. Importantly, feedstock procurement is aligned with prevailing industry demand and supported by historical offtake patterns with established corporates. This demand-driven approach facilitates multiple procurement-sale cycles within the instrument’s life, thereby enhancing visibility over cash flow generation. In addition to this, the rating also incorporates the presence of a dedicated Sukuk Payment Account, which requires principal pre-deposits in equal weekly tranches ahead of maturity. Furthermore, the proportion of the instrument relative to the Company’s total deployment in self-liquidating working capital assets remains low, thereby mitigating repayment risk.
Compliance with the structure of the instrument including filling the SPA in a timely manner is integral to the rating.

About the Entity
Zarea Limited traces its origins to September 16, 2020, when it commenced operations as Vision 2A (Private) Limited. In August 2022, the Company underwent a strategic rebranding, guided by the vision of transforming Pakistan’s conventional commodity procurement landscape. The Company was subsequently reconstituted as a public limited entity on April 15, 2024. ZAL benefits from a forward-leaning governance and ownership structure. The Company is majority-owned by Mr. Ali Alam Qamar, who serves as it founder and chief executive, providing strategic direction and oversight.

About the Instrument
The proposed Sukuk is a Shariah-compliant, privately placed, unsecured, short-term facility structured under Musharakah (Shirqat ul Aqd) with an issue size of PKR 1,000 million. The tenor is six months from the Issue Date, with the profit rate referenced to six-month KIBOR plus 125 basis points. Profit and principal are scheduled for realization in a single settlement at maturity. Structural protections include a Sukuk Payment Account, requiring staged pre-funding of principal in four equal weekly tranches prior to maturity, with the first three tranches comprising only principal and the final tranche covering both principal and interest payments.