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Return of the Kingdom: ADES IPO to lead Saudi’s IPO revival

Saudi IPOs are poised for a comeback after a year of slower issuance, with some big deals lined up for the last quarter of 2023, and through to 2024.

The highlight for this year is likely to be ADES International Holding, the Saudi Arabia-based driller backed by the country’s sovereign wealth fund PIF, which announced on 28 August its intention to proceed with an IPO on the Saudi bourse (Tadawul).

Recent reports have said that ADES aims to raise more than USD 1bn in the IPO.

The group, which counts clients such as Saudi Aramco [Tadawul:2222], and Kuwait Oil Company, is a major local player in the MENA region but also has strong commercial ties with global energy suppliers with an ambitious strategy for the future.

“We all knew that most IPOs would come by the end of the year; investors take time to look at new stories and we are talking about some large-scale situations that require a lot of internal reorganisations,” said an ECM banker.

Saudi is synonymous with big regional deals after the record listing of Aramco in 2019. The country has proven a fertile equity capital market since, where banks and issuers can galvanise both local and international investors.

In 2019, deal value rose to USD 30.4bn, the highest ever for Saudi and led primarily by Aramco.

In 2022, volumes grossed USD 10.6bn and were more widely spread with 39 IPOs pricing that year. This year so far, 18 IPOs have priced to raise USD 909m.

In 2020 and 2021, volumes stood at USD 2.6bn and USD 5bn respectively. 

Since the start of 2022, there has been USD 11.5bn of total IPO volumes in Saudi. As of 31 August 2023, those listings have risen by an average of 68% in trading. The biggest alpha contributor is Elm Company [Tadawul: 7203], which raised USD 819m in its IPO; its shares have risen over 500% since pricing.

“I think we will see strong IPO activity from now on,” said Faisal Hassan, chief investment officer at Al Mal Capital.

“Liquidity is there, and investor sentiment seems to be strong on IPOs, but bankers and issuers need to pay special attention to pricing,” he said.

In addition to ADES, Saudi Arabia's Lumi Rental, one of the largest auto rental firms in the kingdom, unveiled the details of its listing on 30 August. The company has set a price range of SAR 62 (USD 16.5) and SAR 66 (USD 17.3) per share for an implied market capitalisation between SAR 3.41bn (USD 910m) to SAR 3.6bn (USD 960m).

If 2023 is set to close with a flourish, 2024 is already seeing a strong pipeline.

In 2024, Milling Company3 (MC3), a Saudi Arabia-based miller, broadcaster MBC Group and Aramco Trading, the energy unit of the oil giant, may all seek to list on the Tadawul.

“What we are seeing is a pipeline that is gradually going to be more varied and exciting, with both consumer and private companies coming to market, similar to the pipelines we see in Western Europe,” said the ECM banker, who is involved in several discussions for Saudi IPOs in the next two years.

There are signs that, for Saudi IPO professionals, patience may be about to pay off.

Analytics by Raj Saiya

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