Encouraging Qataris to build equity through IPOs
Amid reports that the regional Initial Public Offerings (IPOs) market in the Middle East and North Africa (MENA) is likely to remain strong, with a total of seven deals, raising USD726 million (QAR2.6 billion) in Q4 of 2013, Qatar launched the Mesaieed Petrochemical Holding Company QSC (MPHC) IPO on December 31, 2013. Three banks have given 100 percent finance to Qatari applicants and in conversation with The Edge, bankers reveal that this pattern is likely to be repeated.
According to a study by EY, IPOs in Middle East North Africa are likely to remain strong in 2014, on better market fundamentals. “There is a strong pipeline of good quality businesses preparing [for] IPOs over the next nine months,” said Phil Gandier, EY’s MENA transaction advisory services leader.
Following a strong increase in listings in the last quarter of 2013, the MENA region has a total of seven deals raising USD726.2 million (QAR2.6 billion), EY stated in the report.
Reflecting a positive sentiment towards IPOs (primarily with the objective of encouraging Qataris to build equity), Qatar Petroleum (QP) launched the MPHC IPO on December 31, 2013 – incidentally, this was just one of the slated four IPOs of a QP subsidiary. The issue, open to Qatari citizens, represented 25.725 percent of the share capital of MPHC.
Further IPOs that have been expected for some time were the Doha Global Investment Company, which has been expected to offer shares to the amount of QAR11 billion, and Barwa Bank which had planned to raise QAR2.05 billion through a public float on Qatar Exchange as well as a rights issue.
Analysts from Middle East business news and data service Zawya told The Edge that the DGIC IPO was delayed because it was still awaiting the regulatory approval. “Moreover, with respect to Barwa Bank, the IPO is still announced and there are no other updates,” they added.
On the successful MPHC IPO, HE Dr. Mohammed bin Saleh Al Sada, the Minister of Energy and Industry and the chairman and managing director of Qatar Petroleum, said, “We are delighted that this successful IPO has provided so many Qatari nationals with an opportunity to become shareholders in MPHC, and to participate in the prosperity and the success of the State of Qatar and in the future of Qatar’s petrochemicals sector.”
Even while the issue was on, reports have stated that Qatari nationals have taken full advantage of the opportunity to own a stake in Qatar’s petrochemical industry, buying up the QAR3.23 billion worth of shares in the MPHC IPO, amid government incentives and generous lending conditions from banks.
Three banks – Qatar International Islamic Bank (QIIB), Qatar Islamic Bank (QIB) and al khaliji – provided 100 percent finance to Qatari citizens.
Commenting on why the bank opted to provide IPO financing, Jamal Abdullah Al Jamal, deputy CEO, QIIB, said that their vision was aligned with the government’s which aims at emphasising Qataris more towards being investors rather than spenders. Mohamed Abdulkhalek, al khaliji’s group chief business officer said that al khaliji has a strong focus on Qatari clients, many of whom bank solely with them. “We wanted to be able to provide our customers with the ability to firstly subscribe to this strongly anticipated IPO, and secondly to help our customers fund their subscription by lending them money so they can purchase sufficient shares thereby making it a worthy investment,” he added.
The banks’ finances are zero interest until the allotment date and Abdulkhalek said that the bank has selectively charged no interest on the loan amount until the date the shares were allocated to shareholders. “As we anticipate the IPO to be well received, we felt that we should only charge interest on the amount ultimately used to purchase actual shares and not on the full amount contributed at the onset. “
Commenting on how providing IPO finance will help grow customers’ wealth in the long term, Abdulkhalek continued that MPHC and QE have been prudent in offering bonus shares and by protecting 50 percent of the allocated amount.