Tech firm set to sell 17% shares

Plans to fetch around Rs1.05 billion from investors at PSX next week

KARACHI:

A tech firm, which develops software (mostly) for overseas markets, is up for selling 16.67% shareholding in the company to individuals and institutional investors in order to raise a minimum of Rs1.05 billion at the Pakistan Stock Exchange (PSX) next week.

The growth company, Coeus Solutions Limited, is scheduled to start bidding at a minimum (floor) price of Rs210 per share to auction as many as 5 million shares on Monday. The auction process (book building process) would remain in place for three days to end on Wednesday.

Later on, the auctioned shares would be available for trade among only accredited investors at growth enterprises market (GEM) board, which is a risky trading platform compared to mainboard stocks at PSX. “Tech was the best performing sector of PSX in 2021,” the company said. “However, it constitutes a mere 6.38% of the KSE-100 index, highlighting the potential for future listings.” Earlier, the company postponed the listing at the bourse in March due to the then prevailing global and domestic political as well as economic instability.

The primary purpose of raising capital of Rs1.05 billion is to “grow Coeus Pakistan’s existing products ie WorkHub and vidmonials and launch a merger and acquisition strategy to acquire already running businesses (software as a service/ SaaS) in Pakistan,” the company said in its information memorandum available at PSX website. Unlike a usual software outsourcing company, the firm operates in Germany via Coeus Solutions GmbH, which has a few clients for whom it acts as their entire product team.

“These clients are the leading companies of Europe”, currently over 30,000 users in over 40 countries use their products, the memorandum said. Pakistan’s IT exports clocked in at $1.8 billion in the previous fiscal year (fiveyear CARG of 26%) and have already reached $1.1 billion in the first six months of the current fiscal year 2021- 22, it said. “Coeus Solutions GmbH operates in Germany, which is an over $100 billion market in 2021 but still underserved, with only 2% of Pakistan’s IT exports attributable to Germany,” it added. It said that it has planned to execute its own consolidations (merger and acquisition) in Pakistan.

There is a scarcity of IT resources especially due to high demand from existing IT companies and startups, so it is difficult to build teams and create products from scratch. “Hence, the company intends to acquire an already running SaaS-based business in Pakistan and to upsell their products to the clients in Germany,” it said. Coeus Pakistan and its associated company in Germany have jointly earned a profit-after-tax of Rs130.4 million in the first half (Jul-Dec) of the current fiscal year. They earned a net profit of Rs173.3 million in the previous year ended on June 30, 2021, and earned Rs113.5 million in the prior fiscal year, according to the memorandum.

This will be the fourth listing on GEM board since the specialised market was developed about a year ago. Besides, three to four more companies have applied for the listing. They are at different stages of getting listed at the PSX GEM board. “The total number of companies at the GEM board will reach around six or more by the end of the current calendar year 2022,” PSX Managing Director and Chief Executive Officer Farrukh H Khan said in an interview to The Express Tribune in April.

In addition to this, the Pakistan Software Export Board (PSEB) recently appointed AKD Securities as its lead manager to get the first eight tech startups listed at the GEM board, he said. Earlier, PSEB signed a memorandum of understanding (MoU) with PSX to make at least 40 tech startups available at the GEM board. Around eight tech startups are yet to apply for the listing, he then said.