DEWA's IPO roped in 'cornerstone investors' such as ADQ and Alpha Dhabi, both Abu Dhabi based investment heavyweights. The hike in offer size to 17% indicates more strategic investors are getting connected. Image Credit: Supplied

Dubai: DEWA has increased its offer size to 17 per cent from 6.5 per cent as its IPO meets overwhelming subscriber demand.

"The new offering of 8.5 billion ordinary shares implies a deal size of 17 per cent," the Dubai utility company said in a statement.

Who gets what

  • New strategic investors will receive around 7 per cent of the company’s share capital (representing approximately 3.50 billion shares) and with a lock-up of between 180 to 365 days.
  • Balance of the offer size (including 'cornerstone investors' who came in earlier) is up from 6.5 per cent to 10 per cent of the share capital.
  • The increase in offer size does not apply to retail investors.

The IPO was heavily over-subscribed from Day 1, with the offer opening on March 24. Retail investors had been keenly anticipating DEWA offering a higher stake - but they will not be getting any of the new shares being offered. (The retail tranche will remain unchanged at between Dh731 million to Dh806 million of the overall Dh7 billion plus issue size.)

The hike in offer size follows approval from the UAE regulator, the Securities and Commodities Authority. DEWA “exercised its right to increase the number of shares offered” from 3.25 billion shares to 8.5 billion, which would result in a free float of 17 per cent of the entity’s share capital.

The Dubai Government will own the remaining 83 per cent. DEWA has also received regulator approval to increase the size of the tranche reserved for ‘qualified investors’ (which includes new ‘strategic investors) from 5.9 per cent (representing up to 2.925 billion shares) to up to 16.4 per cent of the company’s share capital (representing up to 8.175 billion shares).

An eye on 'post-listing'

The higher offer size was determined by the Dubai government as the selling shareholder, following DEWA’s decision to set the offer price range per share between Dh2.25 and Dh2.48 per ordinary share on March 24. The offer period closes on April 2, and thereafter DEWA will announce the final offer price.

The hike in offer size provides “investors with a highly attractive value proposition that reflects the Government of Dubai’s long-term confidence in DEWA’s growth trajectory,” said a statement. “The decision also reflected DEWA’s prioritization of supporting after-market trading performance post-listing.”

Tariq Qaqish

“Dewa offers a great value for long term investors where fundamentals showing solid cash flow, steady attractive yield and secured business environment,” said Tariq Qaqish, CEO at UAE-based Salt Fund Placement.

"In addition sentiments has improved significantly in UAE capital markets due to governance changes and improved macro outlook has increased interest of investors in local stocks. In addition banks were happy to give high leverage which increased subscriptions."

Stable dividend play

"It is also attractive for investors who are looking at a stable dividend play in a currency that is pegged to the dollar where international investors will be happy to allocate to. In a very low yield or negative interest rates a 5.5 per cent considered very attractive specially there is no currency risk associated,” Qaqish added.

The retail tranche accounts between Dh731 million to Dh806 million of the overall Dh7 billion-plus issue size, i.e., 11.4 per cent, which is a sizeable proportion for retail investors to participate in the region.

- Vijay Valecha, Chief Investment Officer at Century Financial

"This could mark DEWA's public share sale as potentially the biggest for the region since Saudi Aramco's and sets the stage for a healthy uptake for subsequent listings that are in Dubai's pipeline," Valecha added.

Sameer Lakhani

According to Sameer Lakhani, Managing Director at Global Capital Partners, "The increase in allocation for strategic investors indicates the appetite regionally and internationally for such a blue-chip offering and sets the stage for a healthy uptake for subsequent listings that are in the pipeline. Clearly, the capital markets revolution has begun."