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Tue 19 Feb 2013 02:39 PM

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Gulf firms preparing IPOs up to $1bn - KPMG

At least five companies planning major flotations; Dubai has not seen IPO since 2008

Gulf firms preparing IPOs up to $1bn - KPMG

At least five Gulf-based companies, including one worth nearly US$1bn, are preparing stock market flotations for 2014, one of the most prominent IPO advisers in the Middle East told Arabian Business.

KPMG partner Vikas Papriwal said interest in initial public offerings (IPOs) had significantly picked up in the past six months and he was advising “four or five” companies who were on track to go public in 12-18 months.

One of the companies – based in the United Arab Emirates – was worth nearly US$1bn. Another was valued at more than US$500m, while the rest were smaller, Papriwal said.

“We had about two years where there was hardly any IPO work happening and in the last six months there’s been at least four or five different [companies] that we’re advising on,” Papriwal told Arabian Business.

“We’ve clearly seen much more of a trend towards [IPOs], [although] bear in mind anyone having a conversation today is still 12-18 months away, to get ready and then to list.”

IPO activity has been quiet since the global financial crisis hit in 2008, with no new listing on either the Dubai Financial Market or the NASDAQ Dubai since mid-2008 when building contractor Drake & Scull went public.

In December, Al Habtoor Group, controlled by billionaire Khalaf Al Habtoor, unexpectedly postponed a planned share sale scheduled for this year. That would have been the largest deal to be launched on the Dubai market.

Another family-run firm, Daman Investments, also pulled the plug on recent plans to list. It was initially planning to hold its IPO before the end of 2012 but is now scheduled for about 2015.

However, the market started to pick up last year, when IPOs in the Middle East raised about US$2bn, double that of 2011, according to a survey by Ernst & Young.

In February, Qatari-controlled Iraqi mobile telephone operator Asiacell raised the largest-ever share offer in that country - US$1.24bn. It also jumped the maximum 10 percent growth within 24 hours.

Analysts expect even more interest in IPOs across the Gulf during 2013.

“We are confident that Saudi Arabia and the UAE will continue to be the regional hubs of IPO activity for investors in 2013,” Ernst & Young’s Phil Gandier told Arabian Business in January.

Papriwal said some of the companies preparing to list had had their plans put on hold when the financial crisis hit.

“Generally the Emirate market has seen a rebound,” he said.  “The moment the emirate's market picks up, a lot of guys who had been holding back IPO plans start thinking of it again.

“[But] how many of them actually end up listing is a different question altogether, because a number of guys who prepare themselves may never see an IPO because they may never have all the criteria that is required.

“Another reason [they list, is because they have] growth plans. A lot of these companies have ambitions to become much bigger and to actually have a brand... in a bigger market; that seems to be a natural reason to list.”

However, not all of the companies preparing to list will do so in the Gulf, where local markets are considered less mature than others such as New York, London and Singapore, where it can be easier to attract investment.

CEO of Gulfmena Investments in Dubai, Haissam Arabi, said there were still challenges preventing more companies from a public listing.

“People were still driven by yields and chasing after yields that’s why fixed income remains the ideal asset class to date in the region,” he told Arabian Business in January.

“We still have issues, you have mostly the geopolitical risk, the Arab Spring, a lot of things will continue to play on investors' minds.”

Arabian Business digital magazine: read the latest edition online