DEWA IPO is seeing success with the strategy of lower offer price attracts a maximum number of participating investors. At between Dh2.25 and Dh 2.48 a share, the DEWA share is easily accessible through banks and other lenders who are willing to provide the extra finance needed for subscription.
In what is likely to be Dubai’s largest-ever initial public offering (IPO) to date, the state power utility, Dubai Electricity and Water Authority (DEWA) began its share subscription on Thursday, amid upbeat prospects and heavy demand among investors.
IPO to raise up to Dh8.1 billion
The likely size of the IPO was made clear when the time to subscribe for shares opened. Multiple Dubai-based market analysts are evaluating how the 6.5 percent stock flotation implied an IPO size of between Dh7.31 billion and Dh8.06 billion and a total market capitalization in the range of Dh112.5 billion to Dh124 billion.
The analysts cheered the pricing, saying that this will encourage all categories of investors. They also added that this improves the chances of the offer being heavily subscribed, with the share allotment expected to end within a few days because of the surge in demand. The strong set of results that was published by DEWA also expectedly sets up the utility giant for successful IPO, the analysts further noted.
The final offer price will be announced on April 6. The opening of subscriptions, according to analysts, will generate the biggest response yet for an IPO in Dubai. The valuations would make DEWA the largest company on the DFM by market capitalization.
Keeping the offer price at under Dh3 a share, DEWA – and its shareholder, the Dubai Government – is casting the net as wide as possible to bring investors on board and add depth to the capital market by bringing in a new generation of investors – UAE nationals and residents alike.
How to buy DEWA shares?
Even the processes have been made simpler. “Subscribers can do online registrations on DFM – through DFM e-subscription – by uploading their Emirates ID and bank account details,” said Vijay Valecha, Chief Investment Officer at Dubai-based Century Financial.
“Moreover, most banks are now assisting with the same to make it an even more of a straightforward process.”
Each person looking to subscribe to or purchase shares in DEWA needs to submit one subscription application each, through his or her bank or brokerage, in his or her personal name (unless he or she is acting as a representative for another subscriber).
Subscribers or potential investors must ensure to have an updated NIN and complete all relevant fields in the subscription application along with all the required documents and submit it to the bank, together with the subscription amount expected to be made during the offer period.
You can instantly apply for an Investor Number or you can submit the form and required documents via DFM eServices on their website (www.dfm.ae).
Attractive dividend payouts
DEWA plans to pay a first dividend payment of Dh3.1 billion after the IPO offering by October. (In January, the entity had made a dividend payment of Dh10 billion to the Dubai government.)
“With the Dh6.2 billion a year dividend commitment, this indicates a yield of 5 percent or higher,” said Sameer Lakhani, Managing Director at Global Capital Partners.
“That immediately places the yield higher than the banks listed on DFM as well as other blue-chips. A 5 percent dividend is as good as it gets for those investors eyeing a steady return.”
“The dividend policy is designed to reflect the group’s expectation of strong cash flow and expected long-term earnings potential while allowing the group to retain sufficient capital to fund ongoing operating requirements and continued investment for long-term growth.”
Investor mantra for DEWA
With a dividend yield of 5 percent or higher, based on initial projections, individual and institutional interest in the IPO will hit its stride in the next 48 hours and maintain that pace all the way up to April 2 and April 5, which are the dates for the closing of subscription to these categories.
“It is important for investors to diversify their portfolios into different sectors and be able to rotate allocation during different economic environments,” said Tariq Qaqish, CEO at UAE’s Salt Fund Placement. “DEWA offers this diversification for investors, especially it has been very successful and has a long track record.”
Retail investors can sign up for a share of the 3.25 billion shares being offered between now and April 2. Institutional and foreign investors as well as DEWA employees too will be participating in what is Dubai’s biggest stock market float to date. (Institutional investors have until April 5 to submit their interest.)
Thus, the share price indicates a high yield at the top range for companies listed on the Dubai Financial Market in the future.