As many as 12 Gulf retailers are ready to list their businesses on global stock markets if market conditions improve significantly, says HSBC Middle East.
The bank, which has slowly increased lending to the retail sector over the past 18 months, says clients are ready to tap equity markets to fund expansion if the pricing and timing are right.
"We have got somewhere from half a dozen to a dozen retail-weighted family groups who are waiting to list somewhere in the globe," said Nicholas Levitt, the head of commercial banking at HSBC Middle East.
"I think probably the biggest bottleneck at the moment is a lack of confidence in the capital markets as opposed to a lack of confidence in a retailer," he added. "There are a number of companies that are listable tomorrow if the capital conditions were in a more confident state."
The market for initial public offerings has dried up in the past couple of years as the equity indexes in the UAE have experienced weak trading and global markets have been volatile amid sovereign debt problems in Europe.
Mr Levitt's comments came as the HSBC hosted a discussion on the retail sector and the sustainability of its robust growth.
"[Given] the aggregate average of feedback from clients in our sector which we deal with, most retailers are growing at a rate of at least 15 per cent [annually]," said Mr Levitt. "There's obviously differing performance in that."
Landmark Group and Al-Futtaim, two of the biggest retail players in the Middle East, agreed that revenue growth of 15 per cent was easily achievable for the sector this year if companies had operations throughout the Gulf. The average GDP growth in the GCC for this year was expected to be between 3 and 4 per cent, said Vipen Sethi, the chief executive of Landmark.
"I would say 15 per cent is good. If it is for an international group within the GCC, it could be better," he said. "We do feel that retail is very buoyant at this point of time. We really do feel that is sustainable because the trend can only improve."
Landmark Group has a big collection of its own homegrown brands, such as Splash, Max, Emax and Home Centre, as well as international franchises with Reiss, New Look, Lipsy and Koton. John Wartig, the finance director at Al-Futtaim, said that despite the general consensus that tourism had been driving spending in the retail sector, local consumer buying had increased and confidence among shoppers was rising. "If you look at our businesses ... we play more in the consumption market, rather than the tourism market," he said. "From my perspective, [the growth] is more internal consumption, which is a much better, stronger message."
Al-Futtaim has five core businesses: automotive; retail; financial services; property; and electronics and engineering and aims to expand in other countries.
It operates Ikea, Toys "R" Us, Marks & Spencer. Its automotive business is the distributor of Toyota, Lexus, Honda, Volvo, Chrysler and Dodge vehicles in the UAE.
Habtoor Leighton Group, a joint venture between Al Habtoor Group and Leighton Holdings from Australia, could be among local companies to list in the next few years.
Yesterday, Hamish Tyrwhitt, the chief executive of Leighton Holdings, said the UAE venture would be "IPO ready" by 2016.
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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