Air Arabia IPO oversubscribed by 150%

Dubai: Some 40,000 investors offered over $1 billion to invest in low-cost carrier Air Arabia, making it oversubscribed by approximately 150 per cent, the company announced yesterday.

Roughly Dh3.75 billion was pledged for the Sharjah-based airline from retail and institutional investors including international banks, resulting in all four tranches being fully covered.

The raised capital will make it the largest public offering in UAE history, according to the airline, after its ten-day initial public offering concluded last week.

The airline offered Dh2.57 billion in stock consisting of 2.57 billion shares, representing 55 per cent of the company's share capital at a price of Dh1 per share. The shares will be listed on the Dubai Financial Market.

Allocation of shares among subscribers will take place on April 8 with refunds for subscribers in the UAE on April 11 and for the GCC on April 14.

Notable offerings

The result of the stock being 1.5 times oversubscribed differs from other notable offerings, such as the listing for Dubai Financial Market, which raised Dh1.6 billion and was oversubscribed 300 times.

UAE telecom du, which listed last year, raised Dh2.42 billion and was oversubscribed 167 times.

Ahmad Badr, financial analyst at Al Futtaim HC Securities, said the appetite for equities has curtailed recently because UAE stock exchanges have struggled. "Investors are afraid to enter the market," he said.

The analyst forecasts Air Arabia to have a price to earnings ratio of 21 for 2007, which he says makes the stock costly compared to the overall P/E ratio for Dubai equities at 11.5 in 2006. "It's more expensive than the market," he said.

Air Arabia, the first low-cost carrier in the Middle East and North Africa, said it would use the capital to carry out an ambitious expansion programme that will lead to new destinations and a new fleet of some 34 aircraft.