10.25 PM Tuesday, 5 December 2023
  • City Fajr Shuruq Duhr Asr Magrib Isha
  • Dubai 05:28 06:46 12:12 15:10 17:32 18:51
05 December 2023

Economic boom fuels IPO flames

By Yadullah Ijtehadi

BETTER PROSPECTS The UAE will be one of the better performing markets next year (IMAD ALAEDDIN)
The Middle East’s IPO market roared back to life this year with more than 63 initial public offerings raising $13.5 billion (Dh49.5bn) until December 1. That is a 73 per cent improvement over the IPO market of last year, which saw 43 initial public offerings raise $7.79bn (Dh28.6bn) in capital.

It looks like the markets are just warming up as continued economic prosperity, privatisation and international investor interest fuels the IPO fire for next year.

No fewer than 118 IPOs are tentatively slated to be launched over the next two years in the Middle East and North Africa region, according to Zawya IPO Monitor. Of these, 85 are likely to be raised from the Gulf, led by Saudi Arabia and the UAE. Clearly, not all IPOs will come to the market, but it does indicate the strong pipeline of offerings in store.

“Over the medium and long-term we remain bullish since we believe in 2008 the UAE will be among the better performing markets,” said Pamela Chikhani, investment analyst at Damac Capital, which published a bullish report on the UAE markets last week.

“We built our advice primarily on the attractive valuations of equities, the strong economic picture, the robust corporate earnings, and the enhanced investor sentiments,” said Chikhani.

In the UAE, family businesses will be the key IPO drivers. “We will see a few privatisations – may be half a dozen – but they will be very large in size,” said Fahd Iqbal, GCC equity strategist at investment bank EFG-Hermes.

“But family businesses will be key drivers coming to the IPO market,” he said, adding the new IPO law, which allows family businesses to offload only 30 per cent of shares rather than 55 per cent, will be the key catalyst.

Saudi Arabia will likely emerge as the biggest IPO juggernaut next year with nearly 48 public offerings. Ongoing structural and financial sector reforms are expected to increase capital flows to the stock market, said a Jeddah-based National Commercial Bank analyst.

“Saudi Arabian companies are opening up and they are taking the IPO route to raise capital,” said Chikhani. “There is also a lot of international interest in the market and the authorities have realised that if they want to be major players in the region, they need to open up. It is not a question of ‘if’ but ‘when’.” The common Gulf market will, no doubt, accelerate that trend.

Financial services were a key sector for the IPO market this year, accounting for more than half of all IPOs in the Mena region – a trend that will continue as more Saudi insurance firms head to the market in the new year. Investment banks were the biggest beneficiaries as they shrugged off last year’s dismal performance to rake in fee-related revenues.

Shuaa Capital has emerged as the biggest lead manager in the year to date, edging out global stalwarts Deutsche Bank and Merrill Lynch. The Dubai-based investment bank helped raise $2.8bn (Dh10.2bn) in the year, co-managing three hot-ticket IPOs such as Dubai Ports World, Deyaar Real Estate and Air Arabia. It is a great turnaround for the bank, as last year it did not even feature in Zawya’s top 10 lead managers’ list.

Saudi-based Samba Financial Group is the second best lead manager in the year for the region, raising $2.76bn (Dh10.13bn). Samba also took top honours as the leading financial adviser in the region, beating Shuaa Capital to secure pole position.

With the common Gulf market kicking-off next year, and oil sailing in the $90s, the IPO tsunami is set to drench the region again. (The writer is Managing Editor, Zawya.com)