UAE: Lulu IPO set to maintain trend of heavy oversubscription, say analysts

The upcoming next week is expected to be another blockbuster IPO, maintaining the trend of strong oversubscription that previous public offerings saw in the post-pandemic period.

The previous IPOs that were floated on the Dubai and Abu Dhabi bourses saw tremendous response from retail and institutional investors, prompting some of them to increase the amount of funds that they were looking to raise through the share sale.

To name a few, utility services provider Dewa was oversubscribed 37 times, Salik 49 times, Parkin 165 times, Borouge 45 times and others.

Lulu Retail Holdings’ IPO will run from October 28 to November 5, offloading a 25 per cent stake through three tranches. This could be the UAE’s largest IPO this year due to the robust growth of the retail sector, and a strong dividend policy among other factors. It is expected that the final offer price will also be competitively priced, which will attract a wider investor base.

Joseph Dahrieh, managing principal at Tickmill, said the Lulu IPO, which is set to raise approximately $2 billion, could see significant interest and be oversubscribed.

“Investor demand could be several times greater than the shares available, with some estimates suggesting oversubscription levels similar to, or even surpassing, recent high-profile IPOs in the region. Lulu’s market presence and investor confidence as well as the sheer size of the listing could support a strong demand, making it one of the most anticipated IPOs in the GCC,” said Dahrieh.

Vijay Valecha, chief investment officer at Century Financial, said the response to Lulu IPO from retail and institutional investors in the UAE is anticipated to be very strong, with an expected oversubscription.

“LuLu Group, founded in 1974, has grown into a common household name in the UAE, with about 240 stores across six countries. As per Global Media Insight, the UAE has a population of 10.17 million, with a significant portion from India, Pakistan, Bangladesh and the Philippines. This Asian demographic forms the primary customer base for Lulu. Given the promising growth prospects in the UAE, this demographic is expected to expand, and with LuLu being recognised as the most affordable retailer in the country, it is well-positioned for growth, supporting the case for its IPO,” said Valecha.

“Moreover, the company intends to distribute 75 per cent of its annual distributable profits after tax as dividends, paid out semi-annually. In 2023, LuLu reported earnings of approximately $753 million, reflecting a year-over-year increase of about 7.2 per cent. Hence, investors and institutions looking for stable dividends may also be interested in the IPO,” he added.