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Listing of Arabia

As geopolitical volatility and interest rate sensitivity wrecked EMEA’s IPO calendar, Saudi Arabia emerged as a bright corner for the market.

There has been USD 3.55bn in Saudi IPO deal value in the first quarter of 2022, by far its best start to a year in recent times.

Among those deals was the USD 1.2bn IPO of Nahdi Medical [TADAWUL: 4164], the Saudi pharmaceutical retailer, which was the largest deal in the region since the mega IPO of Saudi Aramco [TADAWUL: 2222] in 2018.

The transaction was also a popular one, this news service previously reported, with large levels of investor participation.

Although there was strong international interest, demand was driven by local accounts, a structural feature of the Saudi market which goes back years and was even crucial in the IPO of Saudi Aramco, after international investors were reportedly unwilling to pay the price the kingdom wanted for its crown jewel.

“I still think that Saudi is locally and regionally led,” said an ECM banker, adding that while international investor interest in the country has increased over the past few years, deals are underpinned by the local market, which has had the added benefit of helping transactions trade higher in the aftermarket.

Saudi IPOs since the beginning of 2021 have produced a weighted average return of 40% for investors, far higher than the Europe’s IPO cohort over the same period.

Another changing feature of the market is the variety of companies now being brought to market. Alongside retail pharmacy Nahdi Medical, there was the USD 819m listing of digital security services firm Elm Co [TADAWUL:7203] at the end of January.

This followed on from the IPOs of the Saudi Arabian stock exchange Saudi
Tadawul Group [TADAWUL: 1111], renewables firm ACWA Power [TADAWUL: 2082] and food delivery company Jahez International [TADAWUL: 9526], last year. 

“You recently had the IPO of Al Nahdi but the recent crop of IPOs shows that there is growth across the whole Saudi economy,” said a second banker. “It no longer is just oil, there is opening up across the whole economy and tangible growth”.

“It also isn’t like Europe where the growth comes without revenue, these are companies with very real economic growth,” he added.

The growth in the Saudi IPO market has also been a boon for banks, with Saudi Arabia generating banking fees of around USD 41m so far in 2022, according to Dealogic coverage data.

Upcoming deals

Saudi payments company Geidea Solutions, food and catering company Kudu Corp, luxury food company Bateel International and healthcare firm Eed Group, are all likely Saudi IPOs over the next 12 months according to Dealogic’s likely-to-issue (LTI) data.

On Friday, this news service reported that Seera Group is considering an initial public offering (IPO) for its subsidiary, Lumi Rental Company, according to a stock exchange filing.

There are expected to be some other big deals in the Middle East this year. In Dubai, Dubai Electric and Water Authority (DEWA) is in the process of bookbuilding for a potential on a potential USD 2.2bn listing.

Dubai road toll network Salik and Emirates Global Aluminium are also reportedly on the IPO agenda for this year.