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Wed 1 Aug 2012 11:00 AM

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EXCLUSIVE: Market conditions delay Daman IPO to 2015

CEO Shehab Gargash planning to float 33 percent of financial services firm, about to begin 2nd phase of capital raising

EXCLUSIVE: Market conditions delay Daman IPO to 2015
Shehab Gargash, CEO, Daman Investments.

Dubai-based Daman Investments, which increased its shareholder base in June, will probably sell shares to the public by 2015, the company's CEO, Shehab Gargash, said in an interview with Arabian Business.

An earlier offering, Gargash said, would depend on an improvement in market conditions and a rebound in investor appetite, which plunged in 2008 when Dubai's six-year construction and real estate boom came to a halt. 

Daman, established in 1998, was initially planning to hold its IPO before the end of 2012. That will not happen anytime soon - the Dubai Financial Market is down more than 70 percent from its peak in 2008. 

"I don't think the market environment is conducive, liquidity is not there, the appetite is not there and investor sentiment is not there generally,'' Gargash said. "We are on track and are about to begin phase two of our capital raise which will be at a premium over phase one," he said.

In June, as part of its strategy to broaden its shareholder base, Daman sold a 22.7 percent stake through a private placement which values the company at AED440m (US$119.8m). The total number of issued shares increased to 2,588,235 from 2,000,000. The new shares were issued at a premium of AED70 (70 percent) above their nominal value of AED100 per share.

"Looking at our environment, where our end game of our capitalisation, which is an IPO, I venture it will be in 2015 or beyond," Gargash said. "If it happens earlier it means that the market has gotten better and faster than we expected."

Daman's plan is for one third of the company to be publicly held, while the original investors retain a third and the rest is held by investors that came in between such as the recent private placement.

Gargash does not have a target figure for the share sale. The amount he aims to raise will depend on the needs of the company at the relevant time.

"It's important to note that everybody who is in a situation like us, in a pre-IPO, has their eye on the market to see who jumps in first as that will be a very big test as to the ability to raise money from the primary market," he said.    

Engineering group Drake & Scull raised US$324m on the Dubai Financial Market in March 2009, the last IPO on the bourse, while Eshraq Properties, the largest IPO on the Abu Dhabi exchange, raised US$224m in May 2011. The market has been dry since.

Looking forward, Gargash is bullish about a rebound in investor sentiment.

"Two important things happened recently, the regional turmoil politically with the Arab spring and the adjustment in valuations in the more developed regional markets, the Gulf," he said. "Taking both of them into consideration, I think the future looks very promising for the Gulf. The macroeconomics are very sound, the valuations are attainable, the exaggeration premium has been flushed out."