Pakistan's first IT stock listing isn't really an IPO

A listing, not an IPO — and the difference matters

The episode opens with a correction. Muzamil introduces Ali Naqi Shaheen as the co-founder of Coeus Solutions, a company about to launch its first IPO on the Pakistan Stock Exchange. Ali Naqi stops him almost immediately.

“It is a listing on the GEM board,” he says. “Technically, it’s a listing on GEM board and not an initial public offering. It’s an offering.”

The distinction is not pedantic. The GEM board — Growth Equity Market — was launched by PSX only the year before as an intermediate step between private operation and a full main-board listing. At the time of recording, only two other companies had listed on it: Park Agri and Blue X. No tech company had gone this route before. The main board is where conventional IPOs happen and where the general public can participate freely. The GEM board, by contrast, restricts participation to accredited investors — those who can self-declare net assets of five million rupees or more. As Ali Naqi puts it, “effectively, it is kind of public, but it’s not really public.”

Muzamil presses on what that means for an ordinary listener who wants in. The answer is that the bar is lower than it sounds: the five-million-rupee declaration is self-reported, not verified by FBR. But the float is small — only five million shares, representing 15 percent of the company — and if the offering is oversubscribed, individual investors will receive a pro-rata fraction of what they bid for.

From Abbottabad to Lahore: the making of a programmer

Ali Naqi grew up in Haripur, near Abbottabad, where his father worked at Pakistan Ordnance Factories under the Ministry of Defence. His parents sent him to Burn Hall School, an army-affiliated institution known for discipline and for producing an unusual concentration of entrepreneurial talent. Muzamil notes that the previous guest on the show — a founder working on blockchain-based property fractionalization — was also a Burn Hall alumnus.

Ali Naqi did not own a computer until his A-levels in 1998. The fascination was there long before the machine was. His father wanted him to become a doctor. His mother held a different view: “Low aim is a crime,” she would say, and she encouraged all her children toward independence of mind. His elder brother went to the National College of Arts for fine arts — “big drama,” Ali Naqi recalls — and ended up doing well. Ali Naqi applied only to MIT and LUMS for university. LUMS accepted him. He enrolled in 2000 as part of the batch of 2004, studying computer science.

At LUMS, he was, by his own description, a nerd who rarely left the hostel. He finished all his core computer science courses a year ahead of schedule, completing them with the batch of 2003, and spent his final year sitting through social sciences courses that held no interest for him. He also met his future wife during A-levels, which he credits as additional motivation to stay focused and graduate quickly.

The frat house that became a company

The business began not with a plan but with a programming competition. In his third year, Ali Naqi and two friends — Raza Saeed and Ahmed Allahwala — entered an IEEE competition called CSIDC. A fourth member joined purely because he wanted to travel to America if they won. They built a Bluetooth-based remote metering solution. They did not make the top ten, but they believed in the product and tried to sell it to a prominent Pakistani business family. The meeting happened at six in the morning. The first question they were asked was what their fathers did for a living. Nothing came of it.

The real break came through Elance — the platform that later became Upwork. A British friend of Raza’s named Charlie, who was teaching at a school in Bahawalpur, used his credit card to pay the $1,500 membership fee and register their domain. “We started getting the first project there, it was instant,” Ali Naqi recalls. A client named Brian Pollock hired all three of them for $2,400 a month. They were in their third year of university.

They moved into an apartment across from LUMS — a frat house that doubled as an office. Ali Naqi’s aunt gave him 18,000 rupees. He bought two Emachines computers. Raza brought his own. Five founders, three computers, one cook named Zulfiqar who still works with the company today. When bird flu hit and chicken prices collapsed, they bought in bulk and held what Ali Naqi describes as a multi-day langar in the apartment.

Money came in through Standard Chartered bank transfers. “Bank to bank ho raha tha sara,” Ali Naqi says. They never had the PayPal problem that plagues Pakistani freelancers today. On Elance, they became one of the top ten providers globally. The company was called Uran at the time.

Germany: the counterintuitive market

By 2007, the team — now operating as Coeus Solutions after a name change — had around 35 to 40 employees in Lahore. Raza Saeed had separated in 2005 to found Confiz. The remaining founders made a deliberate strategic decision: go into markets where English is not the first language.

“If it’s hard for us, it’s hard for everyone,” Ali Naqi explains. “If it’s hard for everyone, then we would have less competition.”

Germany was the target. Ali Naqi found a LinkedIn competitor called OpenBC — Open Business Club — which had a feature called “haves and wants.” He used it to spam every business contact he could find and scheduled 200 meetings in two weeks on his first trip to Germany in April 2007. The result was half a million euros in projects. He moved to Munich permanently in 2009.

Germany’s tech ecosystem, he explains, is dominated not by startups but by publishing houses — Axel Springer, Bertelsmann, Hubert Burda Media — because German law treats online media as an extension of traditional publishing. Startups face severe penalties for bankruptcy: you cannot open a company for seven years after going bankrupt, which structurally discourages risk-taking. This meant that Coeus, as a Pakistani software services firm, was operating in a large economy with a surprisingly small and concentrated ecosystem. The clients were few but enormous: Volkswagen Group, Audi, and eventually the major insurance and banking conglomerates.

A side note on Bavaria: on his first cab ride from Munich to the airport, Ali Naqi received an unsolicited forty-five-minute lecture from the driver on why Bavaria is not Germany. “We’re in Bavaria,” the driver told him. “We speak Bavarian. We’re not German.” Ali Naqi describes it as a crash course in German regional politics — Bavaria as the richest, most conservative, and most self-regarding of Germany’s federal states, the California of the country in terms of wealth, even if the rest of Germany considers it a village.

The eKomi partnership and the move up the value chain

In 2008, a group of German tech entrepreneurs approached Coeus to build a platform for online reviews and ratings. Their thesis was that e-commerce growth is directly proportional to consumer trust, and that verified third-party reviews would increase both discoverability and conversion rates. Ali Naqi became their technology partner.

In 2012, Google launched its Seller Ratings product — the star ratings that appear in search results. eKomi was one of only fourteen approved providers globally. “In an instant, it became from a niche, third-party verified reviews company to a must-have tool if you had Google AdWords,” Ali Naqi says. The business exploded. Goldman Sachs invested in eKomi in 2015.

Coeus did not remain a vendor. Ali Naqi negotiated to take over the enterprise side of eKomi’s business — selling to banks and insurance companies — on the grounds that staying purely on the technology side made Coeus a cost center that could be replaced. “If you’re on the revenue table, not on the cost table, that changes the business,” he says. Winning AXA Global and Allianz Global as clients followed. eKomi’s team eventually joined Coeus’s board.

Later in the discussion, Ali Naqi maps out the full value chain of software services: bespoke development at 15 to 20 percent gross margins; SaaS licensing; high-value consulting in the style of Accenture or Deloitte; and finally resource augmentation, where a client hires your developers directly and billability approaches 100 percent. “If your billability is 100 percent, you can even charge lesser amount and you can still make a lot of money.” Because Coeus worked with a small number of deep, exclusive clients rather than chasing projects, its net margins exceeded 50 percent in an industry where 20 to 30 percent is standard.

Headcount as a vanity metric

One of the more counterintuitive arguments Ali Naqi makes is about headcount. Around 2011 and 2012, Coeus hired a large QA team to support its scaling. The result was the opposite of what was intended: developers became sloppy because they knew someone else would catch their errors. “When you have a lot of testing team members, the developers kind of got relaxed because they would just commit their code and say, ‘woh test kar lenge.’”

After that, Coeus adopted a policy of outsourcing first and hiring only when absolutely certain a role needed to be permanent. “Whether it is for sales or for support or for anything, we would first do contract work or through freelancers, and we would hire when we are absolutely sure that this needs to be on our payroll.” The result, visible in the books that regulators reviewed during the listing process, was a bottom line that consistently surprised outside observers. “The first thing is: how can you have such a strong bottom line?” Ali Naqi says. The answer was the headcount discipline.

Two new products and the case for recurring revenue

By 2018, Ali Naqi had concluded that a headcount-based services business was not a long-term bet. Talent costs were rising, churn was increasing, and the margins on pure services were compressing. He looked at eKomi’s model — recurring revenues, stable headcount regardless of whether annual recurring revenue was ten, fifteen, or twenty million — and decided Coeus needed to build its own product lines.

The first was Vidmonials: video reviews and testimonials. The insight was that video was becoming the dominant content format, and that the same reasons businesses wanted text reviews — SEO and conversion rate improvement — applied equally to video. The product was prototyped in 2020 and rolled out to eKomi’s 30,000-plus existing customers as an upsell at 29 to 59 euros per month.

The second product emerged from the pandemic. As the team shifted to remote work, Ali Naqi wanted a tool that replicated the ambient presence of an office — a “team wall” where colleagues appear as clickable tiles and connecting to them is as frictionless as walking over to someone’s desk. The product, built as an add-on to Microsoft Teams and Slack, also included an employee rewards feature called Bravo, where colleagues send each other recognition points redeemable for vouchers and cash across multiple countries. Within months of launch, Capterra — part of Gartner — named it a rising star in the employee recognition space. Annual recurring revenue went from $100,000 to $230,000 in a matter of weeks.

Why list in Pakistan, and why now

The listing decision was not about raising capital. Coeus was profitable and did not need the money. The reason was market cap.

Ali Naqi’s growth strategy for Coeus involves acquiring or merging with Pakistani IT companies that have complementary capabilities — Microsoft, Oracle, or SAP integration skills, for example — and enabling them to enter the German market. The problem was that no one wanted to sell. “As I started approaching companies, I figured nobody wants to sell.” The solution was to offer them an upside: a stake in a publicly listed company that rewards results at a multiple. Systems Limited, he notes, trades at 25 to 30 times net profits. “Every euro or dollar that you earn, the market says we give you 20 to 25 euros for it as value.”

“We didn’t need to raise capital,” Ali Naqi says directly. “What we needed was market cap. And because market cap is what Muzamil is interested in. Muzamil wants a piece of the 40,000,000 dollar market cap pie. He’s not interested in 8,000,000 right now. He wants that upside.”

There is a known limitation: Pakistan’s stock exchange values companies on net profits alone, not on product potential or recurring revenue growth. “Uber ki toh koi value nahi hogi Pakistan stock market?” Muzamil asks. “Exactly,” Ali Naqi confirms. This means Coeus is, in his view, structurally undervalued at the current listing price. His response is to float the minimum possible — 15 percent of the company, five million shares — and buy back shares on the open market if the price stays low. The main board listing, where the general public can participate, is already in process.

Three principles govern how Coeus will behave as a public company: never manage to the stock price; only say what you are doing and only do what you are saying; and maintain full transparency, including publishing the German entity’s books to Pakistani shareholders — something Ali Naqi says no other listed company with offshore operations currently does.

Pakistan in thirty years

By the end of the conversation, Muzamil asks Ali Naqi how he sees Pakistan in 2050. The answer is statistical rather than sentimental.

Germany’s towns, Ali Naqi observes, are full of retirees. The pension system is funded by the working-age population, and that population is shrinking. Pakistan’s situation is the inverse: a large, young population that is beginning to activate — opening e-commerce businesses, accessing information, trying new models. “It’s not everybody’s successful, but it’s a there’s so much statistically, there’s so much capital there. There’s so many people trying to do things that there are enough numbers that makes number 101 end up successful.”

The listing itself, he argues, is part of that activation. It opens a door for other tech companies to consider the same path. It makes Coeus an institution rather than a founder-dependent business. “Look at Systems. Systems was made before my parents even met in 1977. It’s an institution right now.” The tech index on PSX, he predicts, will eventually be larger than every other sector combined — not because of foresight, but because the statistics make it inevitable.