GCC Capital Markets Watch - Q2 2023
Q3 2023 Overview
GCC IPO activity continued into Q2 2023 with 13 IPOs raising USD 1.8 billion, supported by relatively active pipelines across both the public and private sectors combined with increased investors’ awareness of the region’s potential.
Q2 IPO volumes were higher than Q1 and excluding the mega IPO of ADNOC Gas in Q1 (USD 2.5 billion raised), Q2 proceeds were USD 1.0 billion higher than the previous quarter.
Q2 2023 was the second best performing Q2 for the GCC in terms of proceeds and volume since 2015, second only to Q2 2022.
Sector trends
Across the GCC, almost half of Q2 2023 proceeds was derived from the Industrials, Manufacturing and Automobile industry, primarily driven by the listing of ADNOC Logistics and Services PLC on the Abu Dhabi Stock Exchange.
When considering just KSA, Health Industries accounts for 41% of the total KSA IPO proceeds with the listing of Jamjoom Pharmaceutical Factories Ltd, whilst Consumer Markets makes up 35% of the KSA proceeds, mainly from the IPO of First Milling Company.
Active countries
GCC capital markets activity in Q2 2023 was confined to the UAE and KSA this quarter.
KSA was the most active country in Q2 2023 by IPO volume, accounting for 11 out of the 13 IPOs for the quarter generating 46% of total Q2 2023 GCC IPO proceeds (USD 827 million).
The UAE, on the other hand, was the most active market by IPO proceeds for the quarter, accounting for 54% (USD 979 million) of total IPO proceeds from two IPOs.
The IPO of ADNOC Logistics and Services on ADX was the largest by proceeds in the GCC for Q2 2023 and raised USD 599 million.
Debt capital markets
Public debt activity, specifically sukuk listings, had mostly been centred in the UAE in Q2 2023.
USD 1.3 billion worth of sukuk were listed on Nasdaq Dubai during the quarter.
Bonds with cumulative value of USD 789 million, USD 366 million and USD 646 million respectively were also listed on Bahrain Bourse, Muscat Stock Exchange and Qatar Stock Exchange, respectively.
Outlook
GCC equity capital markets are expected to continue to be active in the near future. The existing government initiatives in place across the GCC will continue to act as a stimulus but the improved liquidity in the market from the recent IPOs will likely act as a further incentive for more companies to list in the region.
Further privatisations are expected in Dubai as part of the government’s initiative to list a number of entities in the near term.
In the KSA, CMA has issued approval for listing to 23 companies amongst over 100 applicants.
ADX also has a strong pipeline across both state-owned and private entities whilst some activity is also expected in the Muscat Securities Market with the reported potential listing of state-owned entities.
The slowdown in global IPO markets, notably the US and Europe, has not hit the GCC region as it remains an attractive destination for IPO investors.
GCC Q2 2023 highlights
Top 3 GCC IPOs in Q2 2023 by proceeds
- Exchange
- ADX
- Listing date
- 1-Jun-2023
- Money raised
- USD 769m
- Exchange
- Tadawul
- Listing date
- 20-Jun-2023
- Money raised
- USD 336m
- Exchange
- DFM
- Listing date
- 6-Apr-2023
- Money raised
- USD 210m
Regional Activity
UAE
There were 2 IPOs in the UAE raising USD 979 million across ADX and DFM, helping the country to continue as a global IPO leader - ranked 3rd globally by YTD proceeds.
The IPO of ADNOC Logistics and Services on ADX generated USD 769 million in proceeds representing the largest IPO within the GCC and 6th largest globally for the quarter.
ADNOC has listed a number of subsidiaries over the past few years. The listing of ADNOC Logistics and Services marked the 4th listing from the ADNOC group since 2017.
Investors’ confidence in the GCC IPO market was reflected in the demand for this IPO, which was 163 times oversubscribed, the largest oversubscription ever witnessed for a UAE bookbuild.
The other UAE IPO, that of Al Ansari Financial Services, took place on the DFM which generated USD 210 million.
Demand for this family owned business was strong with its shares 22 times oversubscribed.
Considering approximately 90% of businesses in Dubai are family owned, this IPO could be the first of many family-owned business IPOs to come.
Also in the UAE, MBME Group Private Joint Stock Company completed a direct listing on ADX this quarter..
KSA
In the KSA, there were 11 IPOs in Q2 2023 across Tadawul’s main market and its Nomu market, collectively generating USD 827 million in proceeds
Jamjoom Pharmaceuticals Factory Company and First Milling Company were the two largest listings on Tadawul in Q2 2023, raising USD 366 million and USD 266 million, respectively.
Taking into account the other 9 IPOs, KSA proceeds in Q2 2023 were over 10 times higher than Q1 2023.
There was also a direct listing in KSA this quarter of Mayar Holding Co on Tadawul.
Issuer |
Listing Date |
IPO Proceeds (USD Million) |
Sector |
Exchange |
ADNOC Logistics and Services PLC |
01-Jun-23 |
769.4 |
Industrials, Manufacturing and Automobile |
ADX |
Jamjoom Pharmaceuticals Factory Company |
20-Jun-23 |
336.0 |
Health Industries |
Tadawul |
First Milling Company |
22-Jun-23 |
266.4 |
Consumer Markets |
Tadawul |
Al Ansari Financial Services |
06-Apr-23 |
210.3 |
Financial Services |
DFM |
Morabaha Marina Financing Company |
21-Jun-23 |
83.4 |
Financial Services |
Tadawul |
Almawarid Manpower Company |
19-Jun-23 |
76.8 |
Industrials, Manufacturing and Automobile |
Tadawul |
Tam Development Company |
14-Jun-23 |
20.3 |
Industrials, Manufacturing and Automobile |
Tadawul - Nomu |
Ghida Alsultan for Fast Food Co |
13-Apr-23 |
14.3 |
Consumer Markets |
Tadawul - Nomu |
Almuneef Company for Trade, Industry, Agriculture and Contracting |
07-Jun-23 |
14.2 |
Industrials, Manufacturing and Automobile |
Tadawul - Nomu |
Foods Gate Trading Co |
05-Apr-23 |
6.3 |
Consumer Markets |
Tadawul - Nomu |
Meyar Co |
1-May-23 |
4.2 |
Industrials, Manufacturing and Automobile |
Tadawul - Nomu |
Saudi Lime Industries Co |
27-Apr-23 |
2.9 |
Industrials, Manufacturing and Automobile |
Tadawul - Nomu |
Al-Razi Medical Company |
22-Jun-23 |
2.3 |
Consumer Markets |
Tadawul - Nomu |
Equity market performance
With the exception of the Boursa Kuwait (BKP) that has been affected by a number of recent delistings, GCC equity markets have performed well so far this year with exchanges posting gains from 1 January 2023.
The Dubai Financial Market (DFM) has seen a 14% gain in 2023 YTD driven by the strong performance of consumer-related and real estate stocks, expectations of new listings as well as strong economic outlook .
Post IPO performance of IPOs completed in 2021 - 2023 has been mixed depending on sector, albeit the overall trend is an increase from the value at the time of the IPO.
GCC equity markets performance by cumulative total return since 1 Jan 2021
Source: Eikon (Thomson Reuter), PwC Analysis
Share price performance of 2021, 2022 and 2023 GCC IPOs* by sector, relative to the respective all share index, from the IPO date to 30 June 2023
Source: Eikon (Thomson Reuter), PwC Analysis
*The IPOs of Al Mal Capital REIT and Oman reinsurance have been excluded due to insufficient data.
The percentage figures shown in the chart above are the average share price movements of the newly listed companies under each sector relative to the index performance of the respective exchange.
Debt capital markets
GCC debt markets saw a similar level of activity in Q2 2023 compared to Q1 2023.
In the sovereign sukuk market, the UAE federal government raised USD 300 million from the listing of two treasury bonds on Nasdaq Dubai through UAE Federal Government Sukuk Programme Ltd.
In the corporate sukuk market, Arada Sukuk Limited and MAF Sukuk Ltd issued sukuk, also on Nasdaq Dubai, with values of USD 500 million and USD 500 million, respectively.
In bond markets, the largest sovereign issuance for the quarter was by the Qatar Government with a value of USD 646 million.
The largest corporate bond for the quarter was issued by Oman International Development and Investment Company with a value of USD 154 million.
Global IPO performance
Although global equity capital markets have witnessed some improvement in Q2 2023, as market volatility around the world decreased to more normalised levels, the H1 2023 proceeds are the lowest since 2018.
The IPO market saw an increase in proceeds by 46% (Q2 2023: USD 37.4 billion; Q1 2023: USD 25.7 billion). There were 247 IPOs in Q2 2023 generating USD 37.4 billion, compared to USD 25.7 billion. Chinese Mainland, USA and the Middle East continue to dominate in terms of global proceeds, although US IPO activity is still significantly lower than pre 2022 levels.
Despite the lower volatility in global equity markets, significantly higher interest rates and uncertainty regarding monetary policy from various central banks continually curb investors’ sentiment across Europe and the Americas. In contrast, the Middle East and Chinese IPO markets continue to carry on strong. Global IPO markets could potentially recover by 2024 and companies with strong fundamentals and compelling equity stories would be able to access some funding.
Top 3 IPOs in Q2 2023 by proceeds
- Exchange
- NYSE
- Listing Date
- 3-May-2023
- Money raised
- USD 4.4bn
- Exchange
- Sci-Tech Innovation Board
(STAR Market) - Listing date
- 19-Apr-2023
- Money raised
- USD 1.9bn
- Exchange
- Sci-Tech Innovation Board
(STAR Market) - Listing date
- 25-Apr-2023
- Money raised
- USD 1.8bn
For another consecutive quarter the Asia-Pacific region has outperformed other regions. The region generated approximately 68% of the global proceeds and showed significant increase in terms of both IPO proceeds and volume. The region generated USD 25 billion from 182 IPOs in Q2 2023 compared to USD 17 billion from 158 IPOs in Q1 2023. Chinese Mainland dominated the region and the world generating USD 17.8 billion (YTD IPO proceeds: USD 30.8 billion) approximately 48% of the Q2 2023 global IPO proceeds. Indonesia raised USD 1.4 billion in Q2 2023 and came 4th globally in term of YTD proceeds having raised USD 2.9 billion in 2023. Other notable performers in the region were Hong Kong SAR and Japan ranking 5th and 6th globally by YTD IPO proceeds.
The Americas had 30 IPOs generating USD 8 billion, a 158% increase in IPO proceeds although volume was down by 32%. Compared to the Asia-Pacific region, the Americas generated approximately 218% less in IPO proceeds.
The Middle East continued to be the main driver for EMEA. The UAE generated 42% of EMEA’s IPO YTD proceeds. The UAE generated USD 4 billion in YTD IPO proceeds. Turkey and Italy are the other EMEA countries which made it to the global top 10 by IPO proceeds, ranking 8th and 9th, respectively. In Q2 2023, the EMEA generated USD 4.10 billion through 35 IPOs. Capital market activity in European markets in general remains subdued.
Global IPO activity
Top countries by % of total IPO proceeds raised in 2022
Liquidity is key - debt vs equity funding
As interest rates are on the rise and as such the cost of debt is also increasing, companies need to examine their approach to financing. Companies potentially in need of debt capital might consider more carefully about the timing of such transactions. They should also consider how their credit ratings might have changed because of the impact of high inflation on their businesses which could potentially increase costs related to debt financing. On the other hand, regional government drives and the current GCC economic activity are likely to have a positive impact on investors’ confidence, giving rise to increased equity activity.
Today determines tomorrow
Companies interested in equity funding in the longer term should start preparing now. Because of the regulatory requirements, which vary depending on your chosen market, it typically takes 6-12 months for a private company to get ready for an IPO – a process which involves looking at how your business has performed over the last 3 years, its outlook and its corporate governance.
Equity ready
Ensuring all the regulatory requirements are met is a given in all IPOs. One key aspect to also consider in an IPO is the equity story - a company’s appeal to potential investors. In the post COVID-19 era, equity stories will need to be stronger than ever. Executives need to ensure the company has a solid track record and a future-proof strategy that will resonate with its target investors. Some of the major themes apparent in equity transactions globally in the recent quarters include a strong balance sheet, efficient capital structure and environmental, social and governance (ESG) premium.
How PwC can help you
At PwC, we understand that good preparation is essential to a successful IPO and debt issuance. We have experience in a wide range of international, regional and domestic IPOs and debt issuances, and can provide expert guidance from initial planning, through to execution and beyond.
IPO and debt preparation
Our IPO and debt Readiness Assessment is an early stage diagnostic review of the critical areas needed for a successful issuance. We highlight where current processes, procedures, structures and practices fall short of the requirements for a company whose securities are to be publicly traded and provide recommendations on how to address these gaps. Our assessment can be tailored to include these aspects as well as some broader areas such as business continuity and contingency planning.
IPO and debt execution
We work with issuers and their advisors to provide IPO and debt advisory and assurance services. This may include working capital reporting, financial due diligence, financial positions and prospects procedures assessment, assistance with MD&A drafting in relation to a prospectus, comfort letters and project management.
Authors
Muhammad Hassan
Capital Markets Leader, PwC Middle East
Alex Tsui
Senior Manager, Capital Markets, PwC Middle East
Contact us
Haitham Aljabry
Finance & Accounting Consulting, Partner, PwC Middle East
Tel: +966 54 732 2225
