$1.75bn in IPOs planned in Egypt this year

Emaar Misr is among the Egyptian firms that are planning IPOs this year. Above, an Emaar Misr property in Cairo. Stephen Lock / The National

Egyptian companies could raise as much as US$1.75 billion this year from seven IPOs as the economy begins to recover from the aftermath of the 2011 uprising and attract foreign investors, analysts said.

IPOs expected this year include: Edita Food Industries, a cake and biscuit maker; Emaar Misr, a unit of Dubai's Emaar Properties; Integrated Diagnostics Holdings (IDH), a private sector healthcare firm; Egyptian Centres, a unit of Saudi Arabia's Fawaz Alhokair Group; and Engineering & Construction Group, a unit of the Egypt-based construction firm OCI.

IDH is said to be seeking a dual listing in London and Cairo, while Engineering & Construction Group is eyeing a dual listing in Cairo and the UAE.

Edita, IDH and Emaar Misr could raise up to $750 million collectively, market sources said.

CI Capital Holding, a unit of Egypt’s largest listed lender, Commercial International Bank, expects to help companies raise more than $1bn from four IPOs this year, said Hesham Gohar, the managing director for investment banking at CI Capital. It is involved in the OCI and Egyptian Centres flotations. Last year, it participated in Arabian Cement’s $109.4m IPO, the only flotation in Egypt.

“We are seeing a significant drive to try to promote a much more exciting Egypt to foreign investors,” said Mr Gohar. “There are reforms and initiatives that have been announced, including the new improvement of the tax regime, providing more incentives to promote foreign direct investment, the new Suez Canal project and a special economic zone.”

Egypt has been hobbled with a widening fiscal deficit, lower foreign currency earnings, power shortages and other economic and political problems since the 2011 uprising that brought political instability to the most populous Arab state.

But the rise to power of the former army general, Abdel Fattah El Sisi, in 2013 and the ensuing economic reforms have started to attract foreign investors who shunned the country because of the worsening economic outlook and political instability.

“The macroeconomic environment has improved a little bit and everybody is expecting a lower budget deficit on lower oil prices and subsidy cuts,” said Ahmed El Guindy, the head of investment banking at EFG Hermes, the country’s biggest listed investment bank.

“Also, the environment of low interest rates will help take the budget deficit to a lower level. The recent currency devaluation is another good indicator that Egypt is serious in its attempt to attract foreign investments. If you couple that with strong company-specific performance that has been there for the last few years, and which will hopefully continue in 2015, you should have a good story to float or take a company to the public,” said Mr El Guindy.

The IMF, which had projected in October a growth of 3.5 per cent for the 2014-15 financial year, increased its forecast in January by 0.3 percentage points because of a strong rebound in the third quarter of last year.

Egypt’s economy grew 2.2 per cent in the 2013-14 financial year.

Lower oil prices could help Egypt, which has become a net importer of energy after 2011 because of a rise in power consumption.

The government cut energy subsidies in July last year and improved its tax regime, which will help to lower the budget deficit in the 2014-15 financial year to 11 per cent of GDP from 12.8 per cent a year earlier.

Mr El Sisi’s ascension has also attracted billions of dollars of aid from Arabian Gulf countries, who have backed him after relations soured when his elected predecessor, Mohammed Morsi, was in power.

“If economic and political conditions continue to improve, which is partially contingent on aid packages pledged by sovereign states and other international lenders and donors materialising, the outlook for IPOs in Egypt this year will be very strong,” said Mayur Pau, the Mena IPO leader at the advisory EY.

Egypt’s 88 million population is attractive to investors, who are also buoyed by rising confidence from ratings agencies.

Fitch in December upgraded Egypt’s long-term foreign and local currency issuer default ratings to B from B-. Moody’s in October changed its outlook for Egypt to stable from negative because of its political stability, improved fiscal situation, economic recovery and support from foreign donors.

The Egyptian stock exchange has simplified procedures for listing and amended laws to help boost listings on the exchange. The benchmark index has surged by about 100 per cent since Mr Morsi was removed in July 2013.

“The Egyptian Exchange has been swiftly responding to market needs and made changes to the regime to boost governance, transparency and listing requirements in line with international standards,” said Mohamed Khodeir, a partner at the law firm Tamimi & Company.

“You can instantly note that there is a swifter approach in responding to market practice that will most evidently support future IPOs and listings.”

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