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Wednesday, March 16, 2022

Gulf News - DEWA IPO: How high will the over-subscription go up to?

By Century Financial in Century in News

Gulf News - DEWA IPO: How high will the...

Vijay Valecha, Special to Gulf News March 16, 2022

The message that DEWA is transitioning into a public company – and with an eventual listing on DFM – was delivered to registered email addresses and as SMS to the entity’s consumers. That’s right, all the homes and businesses across the length and breadth of Dubai.

“As Dubai’s exclusive provider of electricity and potable water to over 1 million customers, DEWA is a key part of Dubai’s economic growth story and is at the heart of the emirate’s energy transition,” is how DEWA describes its mission. And “operates state-of-the-art infrastructure that is critical to Dubai, its residents, and its visitor”.

That is precisely what DEWA is about – and which could explain the unprecedented levels of subscriber interest that is already there for the IPO ahead of the start of the offer period on March 24.

Only 6.5 per cent of the company’s equity is being offered via the IPO, but DEWA’s shareholder – the Dubai Government – could raise that percentage.

Will it? According to Saeed Ahmed Al Tayer, Managing Director and CEO of DEWA, “We have offered 6.5 per cent and there is the option to increase.” What he leaves unsaid is what will prompt a raising of the stake on offer to the public.

“There will be no rise in the cost of our services (to consumers), as we are forging partnerships with the private sector to produce water and energy. We will instead focus on improving our operational efficiencies.”

On the subscription side, DEWA’s IPO will sail through – that’s what all analysts agree unequivocally. Right through Tuesday, when the formal announcement was made, participating banks had been pushing the DEWA IPO form to clients. (Of course, there was also DEWA messaging and mailing all on its consumer base to help get the word out.)

“The only question is by how much will the IPO be over-subscribed by,” said Vijay Valecha, Chief Investment Officer at Century Financial. “That should convince the Dubai Government whether they want to go ahead with raising the stake from 6.5 per cent.”

No need for debt

DEWA has multiple projects on hand, including the mega solar-powered plant. A major transition to renewable energy projects is taking place, and these will require heavy capital spend. According to DEWA projections, this year will see Dh8 billion to Dh9 billion in capex.

On the debt side, the CEO wants to keep the load light for the company. He hinted that DEWA will not need to raise debt in the next five years.

According to Thomas Varghese, DEWA’s CFO, “The finances are strong. We have had a robust financial track record. It has not only been steady in the past but will rise going forward. As we move into the sustainable future, we only expect this to rise further.”

That’s exactly what all the potential subscribers to the IPO are banking on – DEWA sure is lighting up investor expectations.

Subscription windows

DEWA is offering two tranches when it opens for subscription March 24. The offering will be made available to individual and other investors as part of the UAE retail offering, as well as to professional investors outside the US, but including the UAE, as part of the qualified investor offering.

The UAE retail offering subscription period is to run from March 24 to April 2. The qualified investor offering subscription period is to run from March 24 to April 5.

Source:
Gulf News