Dubai commuters passing through Al Garhoud bridge might notice a different color on the toll gate – as exclusive operator Salik charts a new growth story, kicked off with the intention to float on the emirate’s bourse.
The company, which became a public stock joint company in June, officially announced its initial public offering on Monday – amid an IPO buzz driven by Dubai’s ambitious privatisation spree.
Along with the IPO, Salik also unveiled its new branding – dropping its resemblance with Road Transport and Authority’s (RTA) red theme. Only the Garhoud bridge toll gate has the new gray branding, which the company said will be rolled out in other gates “in due course.”
The company currently operates eight toll gates across Dubai – particularly placed in strategic junctures, bridges, and other high-traffic areas in the emirate.
In a press conference on Monday, its chief executive officer Ibrahim Sultan Al Haddad said the IPO takes advantage of Dubai’s growing economy, especially as private cars seem to be the most popular mode of transport for its 4.5 million daytime population.
“Salik is a truly iconic brand which provides investors with a unique opportunity to access Dubai’s exciting growth story through exposure to a high-quality infrastructure asset,” he said.
In 2021, Salik recorded a total of 481 million trips passing through its toll gates, where its revenue hit AED1.7 billion. In the first half of this year, the trips already reached 267 million, and the revenue hitting AED944.9 million.
As it aims to attract local and international investors through the Dubai Financial Market (DFM) listing, Salik also expressed its plans to invest in other sources of income, in addition to potentially installing more toll gates in the emirate.
Salik also generates income from advertising services (on toll gates and mobile application), as well as from consultancy services to governments “looking to either implement toll gates, or optimise existing operations.” It also plans to monetise the data it collects.
The company also mentioned the potential of adopting a “dynamic pricing model” in the future, although it was not immediately clear whether it meant raising current tariffs.
Here’s an overview of the recent announcements around Dubai’s Salik:
- Dubai Ruler turns road toll operator Salik into a public joint stock company
- How Salik turning into a PJSC will impact use of toll gates in Dubai
- Dubai Salik IPO highlights
- Dubai road-toll operator Salik to list 20 percent stake in IPO on DFM: Reports
Dubai Ruler turns road toll operator Salik into a public joint stock company
In his capacity as the Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, the Vice President and Prime Minister of the UAE, has issued Law No (12) of 2022 establishing road toll operator Salik as a public joint stock company (PJSC).
As a public joint stock company, the firm will have legal, financial, and administrative autonomy to carry out its activities and achieve its objectives.
The chief investment officer at Century Financial, Vijay Valecha, said: “Salik’s conversion to a public joint stock company is a step forward in its journey toward an IPO. The decision of the government to permit up to 40 percent public shareholding gives it the option to monetize the assets at a good price when needed.
“The proposed IPO of Salik is part of a broader plan to list ten state entities to revive Dubai’s stock market. Even though global markets are volatile, GCC indices are having a stellar year on account of its biggest export, oil, trading at a higher price.”
According to the law, Salik Company PJSC will have a term of 99 years, starting from the date of its registration in the Trade Register. The term renews automatically for the same period as per the company’s articles of association.
The Dubai-headquartered company will also have the right to open branches and offices in Dubai and outside the emirate.
The law also states that the Roads and Transport Authority (RTA) in Dubai is authorised to outsource all or part of Salik’s functions related to the operation and management of toll gates, as per the concession contract signed between RTA and Salik.
The concession contract outlines the rights and obligations of each party, as well as the duration of the contract.
The CEO of Seven Capitals, Mohammed Shaheen, said: “Dubai is witnessing a huge leap in demand for Initial Public Offerings (IPOs), a reflection of the efforts in the country to strengthen its economy.
“This unprecedented demand for IPOs in the Dubai is fueled by investors’ confidence in the long-term economic growth, transformation plans, and shareholders’ appetite to attain listing gains.”
How Salik turning into a PJSC will impact use of toll gates in Dubai
Pursuant to the Law, proceeds from toll gates, including fees and fines, will be transferred to the company, as per the concession contract signed between RTA and Salik.
Existing toll gates in Dubai can be removed or modified subject to a Decree issued by the Chairman of The Executive Council of Dubai.
New toll gates can also be added subject to a Decree issued by the Chairman of The Executive Council of Dubai, and after RTA conducts a comprehensive traffic study in coordination with Salik.
Pursuant to the Law, Salik is exclusively authorised to operate, manage and develop the traffic toll system in Dubai.
It is also responsible for implementing legislation related to toll gates and the development, operation and management of traffic systems, as per contracts signed with competent authorities both in Dubai and outside the emirate.
The company also provides advisory services related to traffic regulations and the toll gate system and works with RTA to conduct studies for planning and identifying new locations for toll gates.
Salik recently announced it will offer free tags to owners of electric vehicles, as part of its push to encourage sustainable mobility in Dubai.
As of writing, its toll gate in Jebel Ali gets 15 percent of its energy requirement from solar power. Salik aims to replicate this in all of its existing gates, as well as for future toll gates.
“The company will continue to prioritise investing in technology to ensure it is a pioneer of tech-enabled innovation in the sector,” it said in its IPO prospectus.
Dubai Salik IPO highlights
The Dubai government is seeking to raise about $1 billion by selling shares of road toll operator Salik.
Salik is said to have taken out a $1.1 billion loan from Emirates NBD to pay a special dividend to the government, unnamed sources told Bloomberg, adding other IPO candidates in Dubai took out similar loans.
The toll operator aims to stage the listing this month. The Dubai government earlier said it will retain a minimum 60 percent stake in Salik.
The Executive Council of Dubai is authorised to determine the percentage of shares that can be offered for subscription either through an initial public offering (IPO) or private placement.
Valecha added: “In this environment, Salik IPO should be able to attract the most prominent global institutional investors. Qualitatively, Salik is a good company as DEWA since the company is a monopoly and it has a stable revenue stream.
“Infrastructure expansion in coming years and a rise in Dubai population mean Salik will be having strong growth in the future. Therefore, the IPO could garner big attention and can potentially turn out to be a hit among income investors.”
Salik is one of the 10 proposed privatisations in Dubai as part of its plans to bolster its capital market.
Key highlights of Salik’s IPO:
- Salik is offering 1.5 billion shares, representing 20 percent of its share capital
- The offering will have three tranches: for individual subscribers, professional investors, and eligible employees
- Subscription will open on September 13 and end on September 20 for UAE retail investors, and September 21 for qualified investors
- After listing, Salik intends to pay dividends twice every fiscal year (April and October)
- The offer price per share will be determined through, and following, a book building process
Dubai road-toll operator Salik to list 20 percent stake in IPO on DFM: Reports
Dubai is planning to sell a 20 percent stake in its road-toll collection firm Salik in an initial public offering, Reuters reported Monday, citing a document.
The company was converted into a private joint stock company in June, and is looking to sell 1.5 billion shares, according to the document. The price will be confirmed on September 22 and a listing is planned around September 29, it said.
Joint managers in the sale will include Emirates NBD Capital, EFG-Hermes and HSBC Bank Middle East, Bloomberg reported.
Salik is looking to raise around $1 billion from the shares, implying a company valuation of $5 billion, Reuters said, citing sources.
The new listing follows a string of high-profile IPOs throughout the first half of the year.
UAE markets have witnessed a stellar year and are at par to the regional equity markets. Even though there was a stall in the economy, the prompt response of the leadership by arranging mass vaccination drives, sanitisation campaigns, and restricting travel enabled the UAE to strike back with full force.
In 2021, UAE companies posted excellent results, reinforcing the notion that the country’s stocks represent some of the best re-opening investments in the world. In 2021, the DFM rose by almost 28 percent, while ADX had exceptional gains of 68 percent. What was brilliant was the significant jump in profits of listed companies, which was much more than the rise in revenue.
IPOs in Middle East have outpaced Europe for only the second time since the global financial crisis in 2009.
Some of the biggest IPOs so far this year include Dubai Electricity and Water Authority, the largest ever IPO in the UAE. Nahdi Medical Company, Borouge, Americana, and TECOM Group have also proceeded with IPOs this year.
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