Blockbuster DEWA, Tecom listings make Dubai a bright spot in global IPO landscape
Tecom’s offer was oversubscribed 21 times, while DEWA generated interest 37 times over
Dubai: Tecom Group, the operator of Dubai’s ‘new economy’ business clusters, raised Dh1.7 billion through an initial public offering (IPO) this week, signalling the early success of the emirate’s plan to expand its stock market volumes to Dh3 trillion through a series of listings of state-owned enterprises.
Tecom had earlier announced the sale of 625 million shares at Dh2.67 each and a likely dividend payout of Dh800 million a year for the first three years, bringing a whirlwind of retail and institutional demand from markets across the world. The company’s global offer was oversubscribed 21 times with the retail component alone registering the highest oversubscription multiple ever for IPOs on the Dubai Financial Market (DFM) of nearly 40 times.
The Tecom IPO is the latest of Dubai’s 10 planned listings of government and semi-government companies on DFM announced by Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance, with the aim of deepening capital markets and accelerating new listings in vital sectors like energy, logistics and retail.
DEWA’s listing
In April, the Dubai Electricity and Water Authority’s (DEWA) launched the world’s second-biggest IPO of the year, raising Dh22.3 billion, marking a major new milestone in the development of the emirate’s financial markets. Oversubscribed 37 times, the mega offering, which evoked overwhelming demand from both regional and international investors, saw a world-record subscription demand worth Dh315 billion. On listing, the company’s market capitalisation climbed to Dh124 billion, making it the largest company on DFM.
Strong fundamentals
The remarkable success of Dubai’s IPO strategy reflects the deep confidence of the global investment community in the strong fundamentals of the emirate’s state-owned entities and the growth potential of Dubai’s economy despite moribund global markets.
The listings have taken place at a time when several indicators of the emirate’s economy are looking up. Dubai’s GDP saw 6.2 per cent growth in 2021 and 5.9 per cent in Q1 2022, supported by strategic initiatives and economic stimulus programmes. Prime real-estate prices in Dubai rose a staggering 56 per cent in 2021, according to Knight Frank, far exceeding major global cities including London and New York.
In a validation of Dubai’s investment value proposition, fund managers from top global banks and investment giants, including Citigroup Inc., JPMorgan Chase & Co., Bank of America Corp., BlackRock Inc. and Fidelity, were reported to have conducted intensive roadshows earlier this year to assess emerging opportunities in Dubai’s IPO market.
Scripting global success stories
Launched in 2001, the Tecom Group is now home to more than 7,800 companies, 100,000 knowledge workers and 10 large industry clusters including Dubai Internet City, Dubai Media City, Dubai Knowledge Park and Dubai Design District. Overall, Tecom has achieved an occupancy of 83 per cent across its free zone portfolio of 21.1 million sq. ft. of leasable area, making it a strong bet for investors.
The group’s free zones are home to top global companies such as Microsoft, Google, Facebook, IBM, Oracle, Snapchat, Thomson Reuters, CNN and BBC. Tecom has also enabled a host of homegrown start-ups like Careem, Souq and Maktoob to script global success stories.
Stable, consistent returns
The extraordinary global demand evoked by DEWA’s IPO also reflects the strong confidence of global investors in Dubai’s ability to deliver stable and consistent returns over the long term, the bedrock of any investment portfolio.
DEWA’s push to meet growing electricity and water demand in the emirate has seen it create world-class infrastructure worth Dh200 billion with investments over Dh86 billion in the last five years alone. The utility giant is a central player in achieving the goal of the Dubai Clean Energy Strategy 2050 and the Dubai Net Zero Emissions Strategy 2050 to generate 100 per cent of energy production capacity from clean energy sources by 2050.
DEWA’s installed capacity has reached 13,200 MW of electricity and 490 MIGD of water, while its clean energy share has reached 10 per cent of Dubai’s energy mix. Its innovative initiatives have helped it become a model for clean and renewable energy, sustainability, green economy, carbon emissions reduction, and sustainable solutions to mitigate climate change.
The utility is ranked among the top globally in raising the fuel efficiency of generation units with a 90 per cent rate and has increased production efficiency by 33.41 per cent between 2006 and 2020. DEWA has also surpassed prominent European and American companies in reducing its power transmission and distribution network losses to 3.3 per cent, compared to 6-7 per cent in Europe and the US. The company has also reduced its customer minutes lost to 1.66 minutes, compared with 15 minutes recorded by leading utilities in the European Union while its water network losses have decreased to 5.1 per cent, compared to 15 per cent in North America.
Further embellishing its investment attractiveness is DEWA’s Mohammed bin Rashid Al Maktoum Solar Park, a key pillar of its efforts to achieve its target of 100 per cent clean energy in Dubai by 2050. The largest single-site solar park in the world is set to achieve a planned capacity of 5,000MW by 2030 with investments of Dh50 billion. When completed, DEWA’s solar park will reduce over 6.5 million tonnes of carbon emissions annually.
Initiatives to spur capital market growth
Dubai’s ambitions to transform its stock markets with government listings have been supported by a spate of initiatives including the establishment of a market making fund worth up to Dh2 billion to increase liquidity in the markets and a Dh1 billion fund to support tech company IPOs and encourage innovative financial products and solutions.
Dubai is working to constantly enhancing its regulatory framework to attract new digital assets to operate from Dubai, in addition to supporting Environmental, Social, and Governance (ESG) factors and reporting in operations. Furthermore, as part of enhancing the judicial framework needed for the growth of capital markets Dubai has established two specialised courts to promote accelerated resolution of securities disputes.
The emirate’s recent listings have reinvigorated the region’s capital markets despite the bleak global economic environment. Buoyed by its blockbuster IPOs, the emirate has also catapulted itself into one of the world’s top five listing venues this year by listing proceeds. If the initial success is any indication, the upcoming listings will make Dubai one of the brightest stars in the IPO firmament for a long time to come.