Pakistan’s PostEx Expands to Saudi Arabia

Pakistani startup PostEx, which provides financial and logistics services to online merchants, will expand into new markets, starting with Saudi Arabia this year

Muhammad Omer Khan, the founder and CEO of PostEx, stated in an interview, “We are interested in entering other markets to disrupt them because we have identified a gap.”

E-commerce in Pakistan has experienced a 50% increase in the past year, accounting for approximately 1.5% of the country’s total retail market. PostEx is a probable contributor to that expansion.

In Pakistan, online merchants encounter difficulties in maintaining and expanding their operations, as cash on delivery is the preferred payment method for 95% of transactions.

From the time of dispatch to delivery, courier companies in the South Asian nation require 10 to 15 days to resolve those transactions. This results in working capital constraints for online merchants.

Khan established PostEx in 2020 to address these challenges by providing merchants with advanced payment for cash-on-delivery orders and an accompanying logistics service.

After being regulated as a non-bank financial institution in Pakistan, the startup introduced a growth capital offering for online merchants.

Nevertheless, the startup does not offer merchants unadulterated financial support; it only grants them credit if they utilise its logistics service. This is done to mitigate risks.

Khan disclosed to TechCrunch that this model has enabled PostEx to maintain its non-performing loans at a rate of less than 0.03% since its inception.

“Because we can regulate the flow of funds, which means that if we are providing credit, we are responsible for the deliveries and subsequently collect the cash directly from the consumer,” he stated.

The co-founder further stated that more than 80% of the 15,000 active merchants have joined up solely for upfront payments with logistics, while the remaining 20% exclusively utilise the company’s logistics service.

PostEx initially established the financial service using its equity, as Pakistan’s capital restrictions make it challenging to secure substantial debt from conventional lenders.

Nevertheless, the startup began collaborating with traditional banks to provide merchants with loans directly from their balance sheets as it expanded and established a proven track record of credit-payback history and a large number of merchants.

In August 2022, PostEx expanded its logistics presence in Pakistan by acquiring Call Courier, a competitor. The acquisition helped the startup expand its market from three major markets to over 650 cities in a single transaction.

It also facilitated the nationwide adoption of onboarding services for e-commerce companies of all sizes, including lesser businesses, enterprise customers, and large merchants.

Khan stated that PostEx achieved profitability in November of the previous year, just over a year after Call Courier was acquired. Additionally, it has recently attained an annual recurring revenue rate of $21 million, with four million monthly transactions, and anticipates surpassing $25 million by the end of the year.

“The cost of acquisition is nonexistent, except the cost of debt or capital,” he stated. Therefore, our primary objective is to enhance profitability by establishing healthier margins… We are experiencing a monthly growth rate of 10–15%.

Introducing new markets with $7.3M in new funding

In an all-equity funding round managed by Dubai-based Conjunction Capital, the startup has raised $7.3 million to plan its market expansion. The company intends to expand beyond Saudi Arabia and eventually reach the United Arab Emirates (UAE).

PostEx intends to establish operations in Saudi Arabia within the next three months.

Additionally, the startup intends to raise an additional $15 million to establish itself in the new market further. Khan stated that negotiations with investors regarding the forthcoming round are currently underway.

PostEx is also conducting platform testing and has already obtained a financing licence. After effectively penetrating the Saudi Arabian market, it intends to establish itself in the region.

Khan informed TechCrunch that PostEx willwill apply a financing licence to tfrom Saudi Central Bank, the local regulator of Saudi Arabia.

In the interim, it has initiated a pilot program in the country with a small number of small and medium-sized online merchants and one or two significant players, establishing partnerships with local financing partners.

Simultaneously, PostEx intends to augment its presence in Pakistan by increasing its workforce from 6,500 employees in 600 locations to 9,000 by the conclusion of the year.

“We anticipate that certain cities will experience greater growth than others.” Khan stated, “Consequently, we allocate additional resources to those cities.”

Additionally, the startup is conducting a pilot program for a digital payments service that will enable online merchants in Pakistan to digitise payments at the checkout page or at the entryway.

Merchants are already provided with an expense management system that facilitates the administration of salaries, supplier and vendor payments, and expenses through a single portal.

As well as its current investors VSQ, FJ Labs, and Zayn VC, Dash Ventures and Sanabil500 also participated in PostEx’s most recent round. The venture had previously raised $8.6 million prior to this round.