Dubai's DEWA IPO share sale begins: Here's all that happened on March 24

Dubai: Keep the offer price low and make it easy for a maximum number of investors to take part – that’s the strategy DEWA has adopted with its IPO. At between Dh2.25 and Dh2.48 a share, the DEWA share sure is accessible, with banks and other lenders willing to extend whatever additional cash wannabe investors need to subscribe.

In what is likely to be Dubai’s largest-ever initial public offering (IPO) to date, the state power utility, Dubai Electricity and Water Authority (DEWA) began its share subscription on Thursday, amid upbeat prospects and heavy demand among investors.

IPO to raise up to Dh8.1 billion

The likely size of the IPO was made clear when the time to subscribe for shares opened. Multiple Dubai-based market analysts are evaluating how the 6.5 per cent stock flotation implied an IPO size of between Dh7.31 billion and Dh8.06 billion and a total market capitalisation in the range of Dh112.5 billion to Dh124 billion.

The analysts cheered the pricing, saying that this will encourage all categories of investors. They also added that this improves the chances of the offer being heavily subscribed, with the share allotment expected to end within a few days because of the surge in demand. The strong set of results that was published by DEWA also expectedly sets up the utility giant for successful IPO, the analysts further noted.

The final offer price will be announced on April 6. The opening of subscriptions, according to analysts, will generate the biggest response yet for an IPO in Dubai. The valuations would make DEWA the largest company on the DFM by market capitalisation.

Keeping the offer price at under Dh3 a share, DEWA – and its shareholder, the Dubai Government – is casting the net as wide as possible to bring investors on board and add depth to the capital market by bringing in a new generation of investors - UAE nationals and residents alike.

How to buy DEWA shares?

Even the processes have been made simpler. “Subscribers can do online registrations on DFM – through DFM e-subscription - by uploading their Emirates ID and bank account details,” said Vijay Valecha, Chief Investment Officer at Dubai-based Century Financial.

“Moreover, most banks are now assisting with the same to make it an even more of a straight-forward process."

Each person looking to subscribe to or purchase shares in DEWA needs to submit one subscription application each, through his or her bank or brokerage, in his or her personal name (unless he or she is acting as a representative for another subscriber).

Subscribers or potential investors must ensure to have an updated NIN and complete all relevant fields in the subscription application along with all the required documents and submit it to the bank, together with the subscription amount expected to be made during the offer period.

You can instantly apply for Investor Number or you can submit the form and required documents via DFM eServices on their website (www.dfm.ae).

Attractive dividend payouts

DEWA plans to pay a first dividend payment of Dh3.1 billion after the IPO offering by October. (In January, the entity had made a dividend payment of Dh10 billion to the Dubai government.)

“With the Dh6.2 billion a year dividend commitment, this indicates a yield of 5 per cent or higher," said Sameer Lakhani, Managing Director at Global Capital Partners.

“That immediately places the yield higher than the banks listed on DFM as well as other blue-chips. A 5 per cent dividend is as good as it gets for those investors eyeing a steady return.”

“The dividend policy is designed to reflect the group’s expectation of strong cashflow and expected long-term earnings potential, while allowing the group to retain sufficient capital to fund ongoing operating requirements and continued investment for long-term growth.”

Investor mantra for DEWA

With a dividend yield of 5 per cent or higher, based on initial projections, individual and institutional interest in the IPO will hit its stride in the next 48 hours and maintain that pace all the way up to April 2 and April 5, which are the dates for the closing of subscription to these categories.

"It is important for investors to diversify their portfolios into different sectors and be able to rotate allocation during different economic environments,” said Tariq Qaqish, CEO at UAE's Salt Fund Placement. "DEWA offers this diversification for investors, especially it has been very successful and has a long track record."

Retail investors can sign up for a share of the 3.25 billion shares being offered between now and April 2. Institutional and foreign investors as well as DEWA employees too will be participating in what is Dubai’s biggest stock market float to date. (Institutional investors have until April 5 to submit their interest.)

The share price suggests a future yield that is easily at the top range for companies listed on the Dubai Financial Market. (The yield is based on the company’s stated dividend policy, with DEWA confirming it will be paying a minimum of Dh6.2 billion a year from October this year to April 2027.)

Big names back DEWA

The DEWA IPO has already gotten some big names as investors, including Abu Dhabi’s ADQ and Alpha Dhabi Partners. The other ‘cornerstone investors’ to sign up are Emirates Investment Authority, the UAE Strategic Investment Fund, the Multiply Group and Investment Holdings.

These investors have committed to purchase shares in the ‘qualified investor offering’ of the DEWA IPO. Together, they have committed to Dh4.7 billion, and when allocated shares will be subject to a 180-day lock-up arrangement. (Cornerstone investors are those who commit to an IPO in advance for a fixed amount of money or for a fixed number of shares.)

“This IPO represents an opportunity for investors to participate in a unique growth story that is underpinned by the ambition of Dubai and the UAE,” said Saeed Mohammed Al Tayer, Managing Director and CEO of DEWA.

“Since announcing our intention to float, we have received strong interest from local and international investors that recognise our determination to shape a green future for Dubai.”