Thanks to the Dewa IPO, which will open for subscription on March 24, all the UAE banks are witnessing a rise in investor interest for loans.
The IPO will see the Dubai utility services provider sell a 6.5 percent stake as it lists on DFM.
Dewa is offering a ‘minimum’ annual dividend payment of Dh6.2 billion for five years, with the payout to be made semi-annually. Banks are willing to meet investor needs by putting up half of the amount being asked for, with the Dewa stock then being used as collateral.
“Given the clear guidelines that exist on lending against securities, there would be no problem,” said Sameer Lakhani, managing director at Global Capital Partners.
“Average borrowing rates are in the 5 to 6 percent range,” said a source, “There have been loans offered at even 0.5 percent over the EIBOR rate to select clients.
Dewa leads IPO series
Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister, and Minister of Finance, announced in November that the government will list 10 state-owned companies on the DFM to increase the size of the stock market in the Emirate to Dh3 trillion, raise the competitiveness of bourses and encourage IPOs.
Salik toll system is expected to be next in line after the Dewa listing in April.
“Today represents a significant moment in the history of Dewa and is an important step towards achieving our vision for capital markets in Dubai. As a central component of the Dubai economy, Dewa has a critical role to play in supporting the future growth of the Emirate and its transition to a net-zero economy by 2050,” Sheikh Maktoum said.
For Dewa’s potential new shareholders, Sheikh Maktoum said this offering is an opportunity to be part of the future of Dubai and have a stake in an organization that has an unparalleled track record of technological innovation and operational excellence.
Strong balance sheet
Dewa and its subsidiaries, which caters to the emirate’s 3.4 million people, have assets worth up to Dh190 billion ($52 billion). It6 recorded Dh23.8 billion revenues in 2021, reflecting a compound annual growth rate of two percent during 2019-21.
The power utility reported Dh12.1 billion adjusted earnings before interest, taxes, depreciation, and amortization in 2021 while net income stood firm at Dh6.6 billion. It has a strong balance sheet with low net debt of just Dh17.6 billion last year.
The utility company, which serves over one million customers in Dubai, has a generation capacity of 13.4 gigawatts of electricity as well as 490 million imperial gallons of desalinated water each day. It has a 70 percent stake in Empower, the world’s largest district cooling services provider by connected capacity, with a total contracted capacity of approximately 1.6 million refrigeration tonnes.
Stock market boom
Vijay Valecha, Chief Investment Officer at century Financial, reckons that fresh funds and new stock market participants will drive Dewa’s IPO to a new record for the Dubai stock markets. “Retail investor interest is building and the process of applying has been made easy,” he said, “Education on how to apply for the IPO has been great. It is also a company that is so well known.”
CEO of Dewa Saeed Mohammed Al Tayer said, “Looking ahead, Dewa will support the UAE’s strategic growth ambitions by providing Dubai’s millions of residents and visitors with world-class services and innovative energy solutions. And that, in turn, will enrich lives while ensuring the happiness and wellbeing of all our stakeholders.”
