Sale of the century

The subprime crisis and ensuing credit crunch have derailed many planned IPOs across the Gulf over the last six months. Now confidence may be returning as companies are slowly tempted back to the market.

Gulf investors looking to buy new company stock have had a tough time of it these past six months, as financiers have opted to sit out the turbulence in global equity plans and delay planned share sales.

However, that may be set to change as regional stock exchanges start to announce new proposed listings.

"Changes in regulations are making it easier for companies to go public and investors are becoming more educated and confident when looking for value," Sanjay Vig, managing director of investment bank Alpen Capital, tells Arabian Business.

"Now that the markets are more stable, investor confidence has definitely returned," he adds.

Vig's optimistic outlook is supported by a report from Gulf Capital which predicts at least 120 IPOs are planned in the GCC by the end of 2010, as more companies aim to raise capital through equity markets.

Record oil revenues are boosting liquidity in Gulf economies, encouraging companies to consider listing shares despite ongoing turbulence in global equity markets. Companies in the region raised around US$10.5bn from 33 IPOs in 2007.

According to research by the Abu Dhabi-based investment bank, the total value of IPOs over the next 21 months could reach up to US$24bn.

"When one hears this statistic it really does depend on the quality and scale of companies that underlie that," says John Connolly, global CEO of Deloitte. "I believe some of it is about a new market and a new opportunity to get quoted on a new market.

Some of it will also be about entrepreneurial companies that are going to have the opportunity to raise capital nearer to home, without the complexity of going off to the distant markets."

Planned listings slated for the coming weeks in the UAE include Future Pipe Industries and Depa Limited. Future Pipe, established in 1984 by the Lebanese-based Makhzoumi family, is involved in the manufacturing of fibreglass pipes.

Just last month, management announced their decision to sell up to 35% stake in the company, with the aim of raising funds for expansion.

The company chose to list solely on the dollar-denominated DIFX platform because it provides exposure to both a regional and an international investor base, which is in line with the corporate values of the multinational firm.

Depa Ltd is a luxury interiors contractor that fits out super yachts, offices, malls and hotels, and whose credits have included the interior of Dubai's famous Burj Al Arab hotel.

The Dubai-based company is looking to raise more than US$400m, through the listing of shares on the DIFX and global depository receipts in London, representing over a 40% equity stake in the firm. The company plans to use the funds to expand business into new countries and markets.