TLDR:
Lulu Retail expands IPO to 30%
Masarrah Investment commits Dh250 million
Market cap projected up to Dh21.07 billion
ABU DHABI (The Thursday Times) — Lulu Retail, the preeminent pan-GCC full-line retailer, has announced a substantial increase in its initial public offering (IPO) size, elevating it from 25% to 30% of the company’s total issued shares. This strategic decision reflects the overwhelming demand from a diverse investor base, encompassing international, regional, and local stakeholders. The total offering now comprises over 3.09 billion shares, with the additional allocation directed entirely towards the qualified investor tranche, accessible exclusively to professional investors. Notably, the offer price range remains unchanged, set between Dh1.94 and Dh2.04 per share.
The augmentation of the IPO size translates to a total offering valued between Dh6.01 billion and Dh6.32 billion, positioning Lulu Retail for a formidable market debut. The anticipated listing on the Abu Dhabi Securities Exchange (ADX) is scheduled for November 14, with market capitalisation projections ranging from Dh20.04 billion to Dh21.07 billion. The final offer price will be determined through a meticulous book-building process, with an announcement expected on November 6.
Strategic investments, cornerstone commitments
A pivotal development in this expanded offering is the inclusion of Masarrah Investment Company, a Saudi Arabia-based entity, which has committed Dh250 million as a cornerstone investor. This addition complements previously announced cornerstone investors, including the Abu Dhabi Pension Fund, Bahrain Mumtalakat Holding Company, Emirates International Investment Company (EIIC), and the Oman Investment Authority. Collectively, these cornerstone investors have pledged over Dh1 billion, with EIIC alone committing $100 million. The shares allocated to these investors are subject to a 180-day lock-up period, underscoring their long-term commitment to Lulu Retail’s growth trajectory.
Significant demand
The decision to increase the IPO size is a direct response to the substantial demand observed from a broad spectrum of investors. Lulu Retail’s established pan-GCC presence and clear growth strategy have attracted significant interest, prompting the company to accommodate this enthusiasm by expanding the offering. This move aligns with the UAE’s broader economic objectives, promoting market diversification and enhancing the depth of its capital markets.
Financial performance, growth prospects
Lulu Retail’s robust financial performance underpins investor confidence. In 2023, the company reported revenues of $7.3 billion, marking a 5.6% increase from the previous year. The first half of 2024 continued this upward trajectory, with revenues reaching $3.9 billion, a 5.6% year-on-year growth. This consistent performance is attributed to sales growth from existing stores, strategic expansion of the store network, and a burgeoning online sales channel. The company’s commitment to maintaining a total dividend payout ratio of 75% of annual distributable profits after tax, distributed biannually, further enhances its investment appeal.
Market positioning, strategic initiatives
As the largest full-line retailer across the GCC, Lulu Retail operates over 240 stores, serving a diverse customer base. The company’s strategic initiatives focus on enhancing its private label offerings, broadening its international product range, and expanding its online partnerships. Additionally, Lulu Retail is investing in enhancing the in-store experience and expanding its ‘Happiness’ loyalty programme to drive customer engagement and retention.
The expansion of Lulu Retail’s IPO comes at a time of heightened activity in the GCC’s retail sector. The region’s retail market is projected to present a $100 billion opportunity over the next five years, driven by economic diversification efforts and a growing consumer base. Lulu Retail’s strategic positioning and growth initiatives align with these market dynamics, positioning the company to capitalise on emerging opportunities and deliver sustained value to its shareholders.
