DEWA Dubai Electricity and water authority Image Credit: Anas Thacharpadikkal/Gulf News

Dubai: The Dubai Electricity and Water Authority will be increasing its stake meant for retail investors.

This means retail investors in the IPO - which has already seen significant interest from retail and institutional buyers - now get 9.2 per cent of the upsized offering.

Earlier this week, DEWA had raised the size of the stake offering, from 6.5 per cent to 17 per cent, saying the increased stake will be offered to 'qualified investors'. At that time, retail investors were not part of that offering.

Today's announcement puts them in the thick of the action, "Following significant demand and oversubscription from retail investors, the Government of Dubai as the selling shareholder took the decision to increase the size of the retail tranche from 260 million shares to 760 million shares," said a statement. "This means the number of shares offered in the DEWA IPO has increased from 8.5 billion ordinary shares to 9 billion ordinary shares, which would result in a free float of 18 per cent of DEWA’s share capital, with the Government of Dubai continuing to own 82 per cent."

The new DEWA numbers
* Retail tranche increased from 260 million shares to 760 million shares "due to significant demand and oversubscription from retail investors".

* New offer size of 9 billion shares implies a deal size of between Dh20.25 billion and Dh22.32 billion.

* Final retail tranche to be between Dh1.71 billion and Dh1.88 billion.

* Factoring in the tranche meant for eligible DEWA employees, retail investors represent 9.2 per cent of the upsized deal.

This is the first time that DEWA has confirmed the over-subscription. According to market sources, the IPO - the biggest in Dubai in more than a decade - might have cleared the over-subscribed mark by the close of the first day of the offer period, which was on March 24, or by the second day itself.

The offer period for retail investors (and eligible DEWA employees) closes today (April 2) and will be followed by the closing for institutional investors on April 5.

DEWA will then be announcing the share price, which reports say will be loser to the top end of the offer range of Dh2.25-Dh2.48 a share.

The response is the clearest indication yet of the demand from the populace - a revolution of the capital markets is well underway.

- Sameer Lakhani of Global Capital Partners

The IPO represents the first of 10 from Dubai-owned government enterprises, with the toll operator Salik being the next likely entrant to the capital markets. The DEWA offer generated significant retail buyer interest, with many taking loans or generating cash selling other assets to raise their IPO subscription funds. "Increasing the tranche for retail investors will cheer the markets as it broadens the investor base - and also allow subscribers to get better allocations," said Sameer Lakhani, Managing Director at Global Capital Partners.

Dubai expects to create a stock market with a Dh3 trillion market cap through the steady listings of government enterprises. The move has also led many privately owned businesses to consider going public.

The IPO starts at Dh5,000, which makes it a realistic option for mid-income savers, while other investments require a base investment of much larger sums for near similar returns.

- Kunal Bilakhia of Taxpro Advisors

Gulf News had earlier reported that retail investors had pulled in family members to subscribe as well to improve their chance of getting a higher allotment of DEWA shares, which are to list on or around April 13.

"I expect the average ticket size of the subscriptions to be Dh20,000-Dh30,000 given that a majority expats taking to this IPO will be mid-income savers," said Kunal Bilakhia of Taxpro Advisors. "It is the right opportunity for them to grow their savings at a decent return.

"DEWA already announced a minimum dividend policy - of Dh6.2 billion - for the first five years and to be disbursed twice a year. In my opinion, this IPO is a good five-year plan at the least. You can always exit earlier if the stock price is right for you - but a medium to long-term investment would be a good call.

DEWA power
The Dubai utility services provider currently has approximately 11.4% of its power capacity from clean energy sources, which is the highest proportion of energy from clean sources from among regional entities.

DEWA is aligned with the Dubai Clean Energy Strategy 2050, which aims to provide 100% of the emirate's energy production capacity from clean energy sources by 2050. The Group also expects to supply 100% of water capacity from desalinated water by 2030 using clean energy and waste heat.