Dubai: Potential investors in the Dubai Taxi Company’s IPO – which opens Tuesday (November 21) – have been flooding local banks with loan requests, which they plan to use to subscribe for the shares. The demand generated is the ‘biggest to date’ for a Dubai IPO, banking industry sources say.
“There are many who missed out subscribing to the Salik IPO last year – they don’t want that to happen with the Dubai Taxi float,” said a banker. “The FOMO (fear of missing out) sentiment is very much in evidence.”
Loan submissions are anywhere from ‘Dh50,000 to Dh10 million’, said another banker.
This despite the high prevailing interest rates on new loans, after the round of 11 hikes brought on by the US Federal Reserve and matched by the UAE Central Bank.
For banks that will offer loans for the IPO subscription, it’s coming out as a true win-win situation for them.
“Most of the loan will anyway gets repaid back instantly because investors get low allocation,” said a banker. “But for special customers we offer competitive rates that include very low markups over the EIBOR (0.25 per cent) lending rate. And even fixed rates depending on the tenor and the customer.
“But the demand for Dubai Taxi Company is the highest that we have seen since the beginning of the IPO process. We are advising customers to expect low allocations. Because of this, they are increasing their amount for the IPO subscriptions.
“Based on what we are seeing, this will sell out in minutes. I cannot comment on institutional investor demand, but even the high networth investor demand is off the charts.”
With nearly 20 years’ experience within the mobility sector as part of the regulatory body at Dubai’s RTA, he had been the CEO of Dubai Taxi Corporation since 2020 and until the formation of Dubai Taxi Company earlier this month.
“As we amplify the DTC story internationally and prepare to welcome new investors through our IPO on DFM, it is a privilege and honour to lead DTC and the highly talented people across the organisation," said Alfalasi in a statement.
Each retail investor in the IPO can expect to pick up a minimum of 2,000 shares. DTC is offering 24.9 per cent in the company to retail and institutional investors (the size can be raised at any point during the process).
Tomorrow, ahead of the subscription opening the IPO price will be announced and the listing on DFM is set for next month.
For the loans, “We are giving IPO investors funds against deposits and even other assets,” said another banker. We see demand higher than for any other IPO we have seen this year in terms of retail loans.”
Dubai Taxi Co. will pay its first dividend of Dh71 million (related to its performance in Q4-23) in April next. For 2024 and thereafter, a minimum 85 per cent will be available for dividend payout.
Investors lining up for Dubai Taxi will have been keeping close tabs on how Salik - the Dubai toll-gate operator - has been performing on the DFM. The Salik stock has gained more than 20 per cent year-to-date, while over the last 12 months, it's been up 32 per cent.
"Throw in the fact that Salik's dividend yield works out to 4.56 per cent, and that's good enough reason for retail investors to make it a highly sought stock in daily trades,' said an analyst. "I think the same mindset will be there for Dubai Taxi once it lists on DFM in December."
But for now, it's all about getting their hands on the IPO allotments - even if it's 2,000 shares. That's a good start in itself...