KARACHI: Symmetry Group Limited (SGL), a digital technology and experiences company, is looking to raise at least Rs430.3 million from Pakistan’s stock market this week.
Its CEO is hopeful that the company’s plan to develop new tech products, increase share of dollar-based revenue, and expand business in foreign markets will entice investors towards the country’s first initial public offering (IPO) in 2023. The listing comes at a time when the PSX, on the back of index-heavy oil/gas and banking sectors, is enjoying a massive positive rally that most experts believe is likely to continue.
SGL, which started off in 2003 with an initial investment of Rs150,000, will see the two-day book-building process get underway on August 8 after months of political and economic uncertainty remained a hurdle to new listings. Its second day of book-building also happens to coincide with the dissolution of the National Assembly.
Offer and post-IPO shareholding
Its offer consists of 101.24 million shares, which includes a fresh issuance of nearly 88.24 million shares and an offer for sale component of 13 million. At a floor price of Rs 4.25, the target has been set at Rs 430.27 million. Topline Securities in the book-runner to the issue.
Post-IPO, the number of shares would stand at 285.25 million, of which the company’s sponsors – CEO Sarocsh Ahmed and Executive Director Adil Ahmed – will hold nearly 90 million each.
Around Rs 55.3 million will go to the two majority shareholders – CEO Sarocsh Ahmed and Executive Director Adil Ahmed – an amount the chief executive said is being used to settle the bridge financing sponsors used to pay back a private equity injection earlier. In its prospectus, the company says the proceeds of Rs375 million would be utilised to fund plans to develop various digital platforms, fund new office development, purchase equipment, hire specialised HR, marketing, business development and to fund working capital needs.
Growth plans and tech listing
Sarocsh, who will see his post-IPO shareholding in the company dilute from 48.87% to 31.48%, said the longer-term plan is to concentrate on exports and increase its share in revenue.
“Our share of exports has gradually increased and currently stands at around one-third of overall revenue,” Ahmed told Business Recorder in an interview last week.
The company’s unaudited accounts show it posted a net revenue of Rs220.3 million in the six months of FY23 (July-December) and reported a profit-after-tax of Rs75.6 million during the half-year period. In comparison, its full-year net revenue during FY22 stood at Rs341.6 million while profit clocked in at Rs71.3 million. Its net revenue, in dollar terms, has grown at a five-year CAGR of 7%, but profit has shown a 34% growth.
“Our half-year profit has surpassed last year’s earnings. Moving forward, we want the export mix to be at 50% by FY26.”
FY25 is when the commissioning of all (new) products would be complete. We should see the complete impact of fundraising in the numbers for FY26: SGL CEO Sarosch Ahmed
Sarosch started his career as a banker and joined Symmetry in 2009. Over the years, he has seen his company secure clients like the Pakistan units of Proctor & Gamble and Unilever, JS Bank, Jazz, HBL as well as UAE’s Advertech Solutions FZ—LLC and SVentures FZ-LLC.
For context, these seven contributed over 80% to the company’s net revenue in FY22, a fact not lost on Sarosch who stressed that clients with IT companies tend to be sticky.
“Some clients have been with us for 5-6 years. Our agreements are normally ‘soft-agreements’ – with back-out clauses ranging from 90 days, 60-days. But it’s not that common.
“For them, the man-hours they have put in are crucial. Hence, IT contracts aren’t that easy to get rid of unless there is a drastic shift in technology.”
Sarosch said the company’s plan is to acquire more clients, as the heavy share of revenue from a few contracts could be seen as a vulnerability.
“We are pushing our existing business to expand in APAC and Middle East with focus on Qatar and Saudi Arabia. The IPO funds will not be used for this expansion.”
Sarosch said the opportunity lies in wait in the two markets with Saudi Arabia standing out because it is “growing so rapidly and this is the right time”.
“There is a lot of IT-related work there.”
While most businesses in Pakistan have expressed their despair over the rupee’s depreciation, Sarosch said the weaker currency has lowered cost for IT-related work from foreign companies.
“Our currency devaluation has helped. Salaries in India are moving higher. Pakistan offers work at 40% of the cost in comparison.”
Meanwhile, the current bull-run at the PSX could go either way for the company’s IPO – an attractive oil/gas sector as well as high interest rates may discourage fund-diversion to tech.
However, when it comes to the company’s internal growth, Sarosch said FMCGs, telecom and banks, especially the digital ones, as well as insurance companies will be seen as avenues.
“Insurance companies are becoming active in the digital space.
“I also see startups in Saudi Arabia as major players for us. They will be seeking technology partners.
“In APAC, I see the games’ business as being key.”
When asked to highlight risks, other than the ones listed in the prospectus, Sarsoch said the company’s inability to retain key human resources would be a challenge.
“This is the internal risk,” he said, adding that this can still be managed by internal controls. “We are considering an employee share option scheme.”
He admitted that Pakistan’ law-and-order situation will be a bigger risk to the company’s growth.
In a press briefing last week, when asked if data breaches are risks, Adil Ahmed, the executive director, said in some cases the risks are assumed by both the client and the company.
“But it depends and differs on a case-to-case basis,” he said.
Sarosch concluded on a positive note, and said FY26 onwards is when the impact of IPO’s fund-raising would be reflected in the company’s accounts.
“FY25 is when the commissioning of all (new) products would be complete. We should see the complete impact of fundraising in the numbers for FY26.”
It is a digital technology and experiences company that specialises in digital products and services. The prime focus of the Company is on transformation and digitalization of marketing, sales and other consumer-centric functions of organisations by providing services such as digital consultancy, digital strategy, development of IPs for the customers, web, mobile & desktop applications, website , portals and user interface, IoT devices etc.
In 2021, SGL started data management and Artificial Intelligence (AI) by launching a new division dedicated to Data Sciences, under the name of Corral.
Copyright Business Recorder, 2023