With Abu Dhabi National Oil Company’s (Adnoc) IPO now being rolled out, the UAE stock market, particularly Abu Dhabi’s, enters a new phase across all levels and in sync with the development the economy is experiencing. It will also meet a most strategic objectives: increase the developmental role of the private sector.
This significant move coincides with the Commemoration Day and the National Day, which highlight the UAE people’s bravery, achievements and loyalty. Besides being a bold step, the IPO represents a great development as it aims to sell individuals and local and foreign companies a minority stake in Adnoc Distribution, the largest distribution company for petroleum products in the country and owner of 460 distribution stations.
It is also the largest IPO of its kind in the UAE and is linked to a sector that is the core of economic activity in the country. Thus, the offering is expected to result in positive long-term implications.
First, it will provide the private sector — whether individual or institution — with investment opportunities given that it enjoys sizeable financial capabilities. It can also handily beat other investment opportunities, including in real estate.
Adnoc’s initiative will also make it possible to channel some private sector investments and individual savings to a vital sector. The petroleum company will also have additional financial capabilities through the IPO, which will help with its local and external investments, especially in light of the new growth and expansion strategy with investments exceeding Dh400 billion over the next five years as stated by His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces.
Adnoc is expected to carry out mega projects so as to branch out into many fields within the refining and petrochemical industry, ensuring significant returns for the local economy and Abu Dhabi’s in particular.
The IPO will give a strong boost to the Abu Dhabi Securities Market, by increasing its market capitalisation and raising the number of listed companies, which would enhance its leverage in the region’s financial markets. And thus enhances the possibility of being upgraded from emerging markets to the developed markets index.
Further developments loom on the horizon thanks to Adnoc’s transformation into a joint stock company. It can effectively contribute to a successful integration of the public and private sectors and serving the broader interests of the economy.
Through this step, the distribution arm paves the way for other large companies in the UAE to take similar steps, which will ultimately lead to a qualitative leap in the nation’s future vision, creating a strategic change in the ownership of such institutions.
It will also provide an appropriate environment for diversifying the economy, in which both the private sector and the public together take on developmental roles.
There are many positive aspects for such a brave step. The parent company has recently gone through various changes that resulted in gaining greater importance domestically and externally, as an entity that can accommodate changes amid new technologies and means of production. A large turnout of local and foreign investors and institutions can be expected for the IPO. As we mentioned in previous articles on the transformation of the Gulf’s oil companies, Adnoc’s IPO, which will be followed by similar offerings elsewhere in the GCC, will lead to radical changes in the industry. The GCC oil companies’ moves come within the framework of a deliberate approach to support their economies and lay the solid foundations for sustainable development.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.