Lulu Retail Holdings, one of the largest hypermarket chains in the Middle East, has initiated an initial public offering (IPO) that may become the biggest in the UAE this year. The offering comes at a time when the region is experiencing a retail spending surge, encouraging domestic companies to pursue listings in the sector.
IPO Details and Expectations
The IPO, which will take place from October 28 to November 5, will offer over 2.582 billion shares. These shares are anticipated to begin trading on the Abu Dhabi Securities Exchange on November 14. According to sources familiar with the deal, the offering could raise between $1.7 billion and $1.8 billion for a 25% stake in the company. However, Lulu has not commented on the potential valuation.
Company Background and Market Outlook
Founded in 1974 by Indian entrepreneur Yusuff Ali, Lulu is following in the footsteps of other grocery chains that have gone public, such as Spinneys in the UAE and BinDawood Holding in Saudi Arabia. Chief Executive Saifee Rupawala expressed confidence in Lulu’s growth prospects, highlighting a $100 billion market opportunity in the GCC retail sector over the next five years.
Shift Towards Local Brands
Consumer preferences in the Middle East have shifted towards local and regional brands. Companies like Alokozay are emerging as alternatives to established Western brands such as Coca-Cola and Pepsi. Additionally, brands like Starbucks have faced backlash from grassroots boycott campaigns due to political tensions in the region.
Recent Developments in the Region
Earlier this year, Saudi Arabia’s Savola Group announced plans to list its grocery subsidiary, Panda Retail. Furthermore, the Saudi wealth fund acquired a 30% stake in Tamimi Markets as part of preparations for the supermarket chain’s IPO. Reports in 2022 indicated that Lulu was exploring an IPO and had engaged investment bank Moelis & Co for advisory services.
Financial Performance and Dividend Policy
In the IPO document, Lulu stated its intention to maintain a total dividend payout ratio of 75% of annual distributable profits after tax, with payments made twice a year, subject to applicable conditions. The company’s revenue for the first half of this year reached $3.9 billion, marking a 5.6% increase compared to the previous year. For the entire year, revenue is projected to be $7.3 billion, driven by growth in existing stores, network expansion, and online sales. Core earnings for the first half of 2024 were reported at $391 million, up 4.3% year-on-year, while annual core earnings for 2023 increased by 7.2% to $753 million.
