Tecom IPO: Dubai company raises $463m from oversubscribed DFM listing

Group expects to pay a $218m dividend annually over the next three years through to October 2025, implying a yield of as much as 6.5%

Dubai Internet City is operated by the Tecom Group, which will start trading on the Dubai Financial Market on July 5. Photo: Tecom Group

Dubai's Tecom Group, the operator of business districts that are home to more than 7,800 companies, raised Dh1.7 billion ($463 million) from its initial public offering on the Dubai Financial Market.

The IPO was 21 times oversubscribed, with total gross demand at more than Dh35bn. The company had set its offering price range between Dh2.46 and Dh2.67 a share, with the final share price set at Dh2.67, giving it a valuation of Dh13.4bn.

Dubai Holding sold 625 million shares, or 12.5 per cent in Tecom, as part of a series of IPOs of state enterprises aimed at boosting the size of the emirate's capital market.

While the offering reflected an average oversubscription of 21 times for both qualified and retail investors, the UAE retail offer was 40 times oversubscribed, making it the highest oversubscription multiple for listings on the Dubai Financial Market.

As a result of the extremely strong demand, the final offer price was set at the top of the price range.

“The tremendous demand we drew both locally and internationally … especially amid challenging market conditions, is testament to the company’s appealing value proposition and growth prospects,” said Malek Al Malek, chairman of the Tecom Group.

“Investors’ strong appetite is underpinned by their optimism toward Dubai’s economy and confidence in the emirate’s capital markets.

“We are incredibly proud to have received the highest ever oversubscription multiple in the retail tranches for any IPO on the DFM, demonstrating the trust that this important investor base has in Tecom Group.”

The UAE Strategic Investment Fund and Shamal Holding are cornerstone investors in the IPO, with a total commitment of Dh283.75m.

Tecom comprises 10 business districts that include Dubai Internet City, Dubai Media City and Dubai Design District.

Subject to market conditions and the obtaining of relevant regulatory approvals in the UAE, Tecom's shares will begin trading on the Dubai stock exchange on July 5 under the symbol “TECOM”.

Dubai Holding will retain a stake of 86.5 per cent in the company.

Last year, Dubai announced plans to list 10 state-owned companies as part of its strategy to double the size of its capital market to Dh3 trillion and attract foreign investment.

The emirate also unveiled plans to set up a Dh2bn market maker fund to encourage the listing of more private companies from sectors such as energy, logistics and retail.

The Dubai Electricity and Water Authority — which operates as a vertically integrated multi-utility, with business activities including electricity generation, transmission and distribution, water desalination and district cooling — was the first government entity to list on the DFM.

The utility, which listed shares in April in the largest public float in the Middle East and Europe since Saudi Aramco went public in 2019, raised Dh22.41bn ($6.1bn) from its IPO.

Tecom has a land bank of 375.3 hectares (40.4 million square feet) and access to additional land through an exclusive right of first offer with Dubai Holding Asset Management, which serves as a bedrock for future growth.

Nine of Tecom's 10 business districts are located in free zones that permit 100 per cent foreign ownership, with tenants including Meta, Google, Visa, BBC, CNN, Unilever and Dior.

The districts allow the complete repatriation of profits and employ more than 100,000 people in areas related to non-oil sectors that include technology, media, science, education, design and manufacturing.

Dubai's purchasing managers' index for the month of May showed that the emirate's non-oil business conditions hit a 35-month high, rising to 55.7, from 54.7 in April. This was the highest reading since June 2019.

Tecom has said it intends to pay dividends semi-annually — in October and April of each year, subject to the approval of its board and general assembly.

The company expects to pay a Dh800m ($218m) dividend annually over the next three years through to October 2025, implying a yield of as much as 6.5 per cent.

Tecom had about Dh1.77bn of revenue and Dh1.17bn in earnings before interest, taxes, depreciation and amortisation (ebitda) in 2021, with a 66.3 per cent ebitda margin.

The group recorded Dh485m in revenue for the first quarter of this year and Dh349m in ebitda, with a 72 per cent ebitda margin.

The lead receiving bank is Emirates NBD. Other receiving banks include First Abu Dhabi Bank (FAB), Mashreq Bank, Emirates Islamic Bank, Dubai Islamic Bank, Ajman Bank, Commercial Bank of Dubai and Sharjah Islamic Bank.

Emirates NBD Capital, FAB, Goldman Sachs, Morgan Stanley and UBS have been appointed as joint global co-ordinators and joint bookrunners.

Tecom Group operates the following business districts:

• Technology cluster: consists of Dubai Internet City and Dubai Outsource City.

• Media cluster: consists of Dubai Media City, Dubai Studio City and Dubai Production City.

• Education cluster: consists of Dubai International Academic City and the Dubai Knowledge Park.

• Science cluster: consists of Dubai Science Park.

• Design cluster: consists of Dubai Design District.

• Manufacturing cluster: consists of Dubai Industrial City.

Dubai Internet City. Courtesy Tecom Group

Dubai Industrial City. Courtesy Tecom Group

Dubai Design District. Courtesy Tecom Group

in5 Innovation Centre. Courtesy Tecom Group

Dubai Science Park. Courtesy Tecom Group