By now, the IPO story in the UAE writes itself.
Full of breathless proclamations extolling virtues of each promoter. The analysts and the commentators line up to praise the offering. Unsurprisingly, it is oversubscribed and only when it starts trading do we get a scorecard for its actual attractiveness.
For the most part, IPOs have performed strongly in the UAE, but even by the loft standards of the ‘buzziness’ that surrounds the excitement of each new public offering, there seems to be something special about the LuLu Retail IPO.
By far the most recognized name among UAE private sector companies that have gone public to date, LuLu boasts of a growing loyal clientele base. And fundamentals that attest to its strong cash flow and gross margins, indicating high retail and institutional demand.
With a halo effect surrounding its founder Yussufali M.A., along with ADQ being a strategic shareholder, the stage is set for the market to turn decisively in favor of private sector IPOs, even though there remains some considerable attractive public sector offerings yet to announce.
A true homegrown narrative
Any analysis of the Lulu Retail offering describes a scrupulous and meticulous investment and growth strategy, alongside the fairy-tale origin story, which naturally attracts a crowd.
Since its founding, its rapid growth is indicative of the financing that is needed as it continues its relentless march in the retail space across the GCC. With its market share and size, the timing of the IPO, is somewhat analogous to the ‘Google moment’ when the US tech company went public in 2004.
In the case of the latter, the primary markets were quiet, still hungover by the dotcom crash of 2000-01. In the case of LuLu, the primary markets have been buoyant, and even though private sector companies have thus far not had the same level of success for the most part as the privatizations have, LuLu appears to be on the cusp of altering that dynamic.
Of course, valuations will matter, and investors will keep a close eye on what the final price is, but every once in a while, an offering comes along that captures the zeitgeist in the capital markets and on-boards a whole new set of investors into the system.
LuLu - and a few others expected in the near term - looks to do the same in dramatically increasing the number of new investors into the system. Its tail effect will be felt in the weeks and months after it lists as these new set of retail investors join the bandwagon.
For now, bankers will be hard-pressed to increase the size of the overall offering given the level of demand that is already present in the system.
LuLu stock’s post-listing trajectory
In a macro sense, domestic grown success stories will naturally deepen the capital markets as more entrepreneurs join the fray of tapping into the capital markets to fund their expansion.
Given the diaspora, and the number of such success stories that are already present in the economy, there can be little doubt that most indeed will.
Many of these candidates will be watching closely to see how the LuLu offering is received and how it performs in the secondary markets in the immediate aftermath. But it is clear that the lineup of such private sector offerings will get larger for 2025, both in the main and the smaller growth markets as entrepreneurs get emboldened by the response.
For investors, a pivot point appears to have arrived, coinciding with increasing concerns about the loftiness of Western capital markets. The rise in prominence of retail investors throughout the world as well as in the UAE and GCC, provides for liquidity (and its much derided counterpart: speculation) which gives confidence to a new breed of investors in a virtuous cycle to follow suit.
Much of its attractiveness will be driven by earnings momentum, but LuLu has a following that is likely to increase and taps into the expatriate Indian community that itself has many more success stories to tout and offer to the public.
It represents a coming of age for the capital markets where the largest expat community will likely be convinced at the retail individual level to invest their savings into a company that reflects its ethos alongside the vibrancy of the UAE, inasmuch as their own lives do.
LuLu represents the passing on the baton to the private sector for its moment in the sun.
