The Securities and Exchange Commission of Pakistan has reportedly put the draft prospectus of Khaadi Pakistan under close review, raising a series of questions as the fashion retailer prepares for its initial public offering. Khaadi plans to raise up to Rs8.3 billion through a pre-offering placement and the public issue, with all 500 million shares in the public issue being new and bringing in about Rs6.2 billion at the floor price of Rs12.40 per share. The scrutiny comes at a sensitive time for the market. Only weeks ago, SE Fruits and Vegetable withdrew its public offering and returned investors’ money, leaving the regulator that cleared its prospectus with questions of its own to answer, and prospectuses now coming through appear to be receiving closer attention.
The central question appears to be how Khaadi treats a property revaluation gain. In 2025, the company changed the way it accounts for investment property, moving from cost to fair value, and recorded a fair-value gain of Rs3,318 million in its audited accounts. The company appears to regard the gain as arising from its operations, while the regulator seems not to agree, and the difference matters because without the gain the year’s profit would turn into a loss. Under Regulation 5(1) of the Public Offering Regulations 2017, sponsors of a loss-making company must retain their entire shareholding for at least two years from the last date of public subscription. Weaves Corporation Limited, Khaadi’s sole shareholder, will own 80 percent of the company after the issue, so if the gain is not treated as operating income, none of those shares could be sold for two years.
Share pricing is another area of concern. Khaadi’s shares carry a face value of Rs0.125, and at the floor price of Rs12.40 each share carries a premium of Rs12.275, or about 9,800 percent of face value. A company is free to set its own face value, but the choice changes how a premium appears to ordinary investors, who may assume they are paying a modest premium when the figure is far higher. The regulator wants the face value stated alongside the issue price wherever it appears in the prospectus. Questions have also been raised about the rent and management fees paid to group companies, which the prospectus puts at Rs1,724 million in rent paid to associated companies and Rs948 million in management fees and reimbursement paid to Weaves Corporation in 2025. The regulator is also said to have sought details on franchise operations, experiential stores, the basis of the valuation and the valuation of intellectual property rights.
Exchanges between the company, its consultant and the regulator are continuing. The timetable for the offering could shift, although no decision appears to have been taken on Khaadi’s listing so far. For investors, closer scrutiny before any money is collected from the public is seen as a positive, because it allows risks to be examined before they become losses. If the regulator’s view on the revaluation gain holds, the sponsor would stay fully invested for two years and share the same risk as new shareholders, and clearer disclosure on face value and group payments would let investors weigh those risks for themselves. The regulator appears interested in improving its review process, but this has not yet translated into revised regulations or new internal procedures for examining prospectuses before approval.
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