Dubai: So, how much did you subscribe for in the DEWA IPO?
Many investors are now realising that subscribing once may not be enough to get all of the share allocation they hoped for. This has prompted many of them to rope in other family members to try their luck too, according to banking industry sources.
“We are seeing multiple applications from the same family,” said one banker. “In fact, there is a surge happening since reports starting coming out that the DEWA IPO was oversubscribed by the end of the first day (March 24) itself. There is a surge in new applications as retail investors factor in the low allocations they will be getting.” (The offer period for retail investors (and eligible DEWA employees) end April 2.
Feedback from market sources suggest that average application size for the DEWA IPO is around the Dh100,000 mark. “There seems to be this belief that this is a once-in-a-lifetime opportunity to deploy savings and get a steady income stream,” said another source at one of the participating banks. “We have never seen anything like this.”
Bank loans
Banks in the UAE keep sending out messages and emails talking of speedy approvals on loans, and this is the option that many retail investors took to subscribe to the DEWA offer. Others sold some of their gold – and with prices at $1,920 plus on an ounce, that was an easy decision to take.
Widespread investor interest
Some investors who placed subscription offers totalling Dh10,000-Dh50,000 are feeling a tinge of disappointment. This comes with the belated realisation that even with the allocations, it will only be a percentage of what they were hoping for. Their only hope now rests with DEWA deciding to increase the stake offer size from 6.5 per cent.
“Everything points to a hike in the offer size, and there have been instances recently in Abu Dhabi when this has happened,” said a market analyst. “Getting a DEWA stock allotment is as secure an investment you can have these days – and with the promise of some handsome dividends from October.” (DEWA has confirmed it will making minimum annual payouts of Dh6.2 billion for the next five years.)
Any confirmation of the hike in offer size will likely happen closer to the offer period closing, sources add. “The resurgence of interest to submit applications in the last 48 hours has to do with investors trying to cover all bases,” said the banker. “So, those who feel they have a low chance of getting a sizeable allotment are rushing to increase their chances.
“They are getting their family members and friends to subscribe on their behalf. The feeling is they cannot afford to lose out.”
In anticipation of the IPO, the Dubai government introduced a 90-day cash settlement for government payables to DEWA and a new subsidy mechanism that will compensate DEWA for discounted tariffs to UAE nationals. DEWA will remain one of the few utilities in the region which does not rely on government subsidies to be profitable
Rating boost
Moody’s, the rating agency, on Tuesday came out with its latest outlook on DEWA, and assigned it a Baa2 rating following the IPO announcement with a ‘stable outlook’. “DEWA's liquidity is excellent, with Dh9.2 billion of cash and cash equivalents as of 31 December 2021,” the agency notes. “For the next 12 months starting April 2022, we expect DEWA to generate around Dh12.1 billion of cashflow from operations.”
None of this might matter to a good number of investors – they are going by an instinct that tells them this offer cannot be missed out on.
