LuLu, one of the largest supermarket chains in the Gulf, operates in 10 countries. Khushnum Bhandari / The National
LuLu, one of the largest supermarket chains in the Gulf, operates in 10 countries. Khushnum Bhandari / The National
LuLu, one of the largest supermarket chains in the Gulf, operates in 10 countries. Khushnum Bhandari / The National
LuLu, one of the largest supermarket chains in the Gulf, operates in 10 countries. Khushnum Bhandari / The National

Business

Economy

UAE’s LuLu Group plans to launch IPO in the first half of 2024

The hypermarket and chain operator plans to list its shares on Abu Dhabi bourse

Fareed Rahman
Fareed Rahman

September 11, 2023

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Abu Dhabi’s LuLu Group International is planning to launch an initial public offering in the first half of next year and list its shares on the Abu Dhabi Securities Exchange, the region's second-largest bourse.

The hypermarket and chain operator has hired investment bank Moelis to advise it on the deal, a company representative told The National.

LuLu, one of the largest supermarket chains in the Gulf, founded by Indian-born businessman Yusuff Ali, operates 254 hypermarkets and shopping malls in 10 countries including India, Egypt, Malaysia and Indonesia.

The company aims to start 80 more hypermarkets in GCC and other countries in the next two years, the representative said on Monday.

The retail conglomerate has been planning an IPO for some time and had initially targeted the listing to take place this year.

LuLu's IPO plans come amid a surge in listing activity on regional stock markets including the ADX, the Dubai Financial Market and Saudi Arabia's Tadawul, as their economies recover from the coronavirus-induced slowdown on the back of higher oil prices and government reforms.

LuLu aims to open 80 more hypermarkets in the GCC and other countries in the next two years
LuLu aims to open 80 more hypermarkets in the GCC and other countries in the next two years

The volume of IPOs on bourses in the Mena region climbed by 44 per cent annually in the second quarter of this year amid robust economic growth, according to global consultancy EY.

Growth in the number of deals was driven by Saudi Arabia and the UAE, the top regional economies, EY said in a report last month.

The number of listings rose to 13 during the three-month period to the end of June, bucking the global slowdown in equity capital markets activity, it said.

However, proceeds from Mena listings dropped by 80 per cent to $1.8 billion, according to EY data.

Middle East IPOs raised more than $23 billion in 2022 from 48 listings, compared with $7.52 billion from 20 offerings in the previous year.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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Updated: September 25, 2023, 9:16 AM
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