Dubai: LuLu has confirmed the IPO range at Dh1.94 to Dh2.04 per share, with the final pricing to be confirmed on November 5.
The range means an issue size Dh5.01 billion ($1.36 billion) and Dh5.27 billion ($1.43 billion).
The much-awaited UAE IPO opened for subscription at 8am, and bankers and market analysts said instant over-subscription is guaranteed. The share price range comes in slightly higher than what the market anticipated, as is the issue size. Most market watchers had been expecting something close to or at Dh5 billion.
There is near unanimity that LuLu will eventually confirm Dh2.04 as the final offer price. Retail investors are guaranteed a minimum 1,000 shares, on minimum investments of Dh5,000 and multiples of Dh1,000 thereafter.
LuLu Retail has a sizable share of the UAE and Gulf's supermarket space, with its expanding operations in Saudi Arabia starting to clock higher returns.
"The stock price range was finalised after extensive study and feedback from the investor community, whether that's from the UAE, the wider Gulf region and international," said Saifee Rupawala, CEO of LuLu Retail. "I think this will give a massive opportunity for the wider segment of market, including our customers and anyone else who has known 'Brand LuLu' to be part of our growth story.
LuLu targets a total dividend payout of 75% of annual profits after tax, which are to be paid semi-annually. The first dividend will be paid in H1-2025.
Retail investors will get 10% of the overall issue size, with LuLu floating 25%. There has already been talk that the retail offer size could be increased given the anticipated levels of subscription. (LuLu has the right to do at any point before the close of the issue.)
Cornerstone investors
The Abu Dhabi Pension Fund, Bahrain Mumtalakat Holding Company Co., the Emirates International Investment Company and Oman Investment Authority have signed up for the IPO as 'cornerstone investors'.
Together, their commitments are for around Dh753 million ($205 million), of which EIIC has committed to subscribe to $100 million. (The cornerstone investors’ shares are subject to a 180-day lock-up arrangement, following the listing on November 14.)
"More than 600,000 people shop with Lulu every day across our multiple store formats, which cater for all shopping experiences and bring the world to the GCC through our diverse and extensive product range," said Rupawala. "We expect continued strong macro-economic growth across our six markets driven by favourable demographic and consumption trends.
"And we continue to invest in our business to drive growth and loyalty across our existing 240-store network while also opening new stores."
LuLu Retail's operational base extends to the six Gulf states, and there is more the retailer intends to get done in Saudi Arabia. In the UAE, the company has focused on creating a wider shopping destination built around the hypermarkets.
"LuLu’s attractive valuation likely ensures that the allocation will not only be well oversubscribed but offer significant value for its investor base," said Sameer Lakhani, Managing Director at Global Capital Partners. "The valuations compare favorably to its retail peers in Western markets. The growth engine along with its dividend policy ensures that demand from retail and institutional investors will be strong."
In 2023, LuLu had earnings of around $753 million, reflecting a year-over-year increase of about 7.2%, according to Arun John, Chief Market Analyst at Century Financial. "Investors looking for stable dividends will also be interested in the IPO," said John
"DEWA, Salik and Parkin - nearly everyone in Dubai uses the services of these three companies. Their IPOs were oversubscribed 37, 49 and 165 times, respectively. Looking at a private supermarket chain IPO, Spinneys was oversubscribed 64 times in aggregate."
By November 5 or November 6, the final reading of what LuLu retail has conjured up as over-subscription will be revealed.
Based on data for the Top 10 IPOs in the region this year, aggregate oversubscription stood at over 100x (including retail and institutional tranches) while the oversubscription for the retail tranche averaged around 30x. We believe that retail subscription largely depends on the maturity of the stock market and the overall addressable population.
