Dubai's government plans to sell a 20 per cent stake in the emirate's toll operator, Salik, through an initial public offering as it looks to boost the size of its capital markets.
The government will sell 1.5 billion shares in Salik and reserve the right to amend the size of the offering, it said on Monday.
The offer price will be published before the start of the offering, which begins on September 13 and closes on September 20 for the first and third tranche of subscribers. The second tranche closes on September 21.
The government will retain 80 per cent in the company after the offering and Salik is expected to list on the Dubai Financial Market on September 29.
“The float size will be the right amount to attract strategic investors and also allow us to price according to our need and the market feedback,” Ibrahim Al Haddad, Salik's chief executive, told The National.
“The market feedback was very encouraging, very positive. We met investors from all over the world.”
Salik outlined additional future growth plans, including the potential to introduce dynamic pricing at its toll gates that would increase revenue and reduce congestion, it said.
“The RTA could implement dynamic pricing through optimising the toll rates depending on the time of the day, for example, by charging a higher toll fee for specific lanes or during peak hours,” said the prospectus.
This would be modelled on similar systems used elsewhere around the world, such as the Dallas-Fort Worth LBJ Express system, Singapore's Electronic Road Pricing System and the Stockholm dynamic congestion zone and bridge toll system.
“The directors believe company’s technology integration through its app and gates would make the transition to a dynamic system relatively easy,” it said.
Other revenue streams include the addition of new toll gates, toll gate and in-app advertisements, the monetisation of traffic data it collects and the provision of consulting services to other major cities looking to introduce toll gates or improve existing ones.
Dubai announced plans in November to list 10 state-owned companies to increase the size of its financial market to about Dh3 trillion ($817 billion), as well as 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 Water and Electricity Authority raised Dh22.41bn from its IPO, making it the largest public float in the Middle East and Europe since Saudi Aramco went public in 2019.
“Being the exclusive operator … will allow us to adopt a dividend policy that is really attractive,” Mr Al Haddad said.
The company expects to start paying dividends twice annually, in April and October of each fiscal year.
The company will pay a first dividend for the second half of 2022 by April 2023 and plans to pay 100 per cent of the net profit as dividends, after setting aside statutory reserves required by law.
From 2023, it intends to pay 100 per cent of the net profit available for distribution as dividend.
Salik reported Dh944.9 million in revenue in the first half of 2022, up from Dh792.9m in the same period of 2021.
Profit for the first six months of this year rose to Dh796.7m, compared with Dh634.4m in the same period a year ago.
Full-year revenue is projected to exceed the Dh1.69 billion earned in 2021, Mr Al Haddad said, without providing a specific figure. Last year's revenue grew from Dh1.38bn earned in 2020.
Salik is a “critical asset” for the emirate, where more than 60 per cent of Dubai’s commuters use private cars, and the net toll traffic from 2013 to 2019 grew at a compound annual rate of 5.5 per cent, the document said.
As of April 30, 2022, Salik had 3.6 million vehicles registered, out of which 1.8 million were Dubai vehicles.
Dubai, home to 3.5 million permanent residents and a daytime population of 4.5 million as of December 2021, forecasts that the population will grow more than 70 per cent growth from 2020 to 2040, and expects to host 25 million visitors by 2025.
“Being so well located in the city and connecting all the landmarks and destinations makes us naturally well positioned to benefit from these dynamics,” Mr Al Haddad said.
Proceeds from the sale will go to the Dubai government, represented by the Department of Finance, Mr Al Haddad said.
The company “has played a pivotal role in managing traffic in Dubai for 15 years and will continue to remain at the heart of expansion plans in the road and transport sector, in support of the emirate’s economy”, Salik chairman Mattar Al Tayer, said at a press conference on Monday.
Salik benefits from “strong macroeconomic tailwinds”, Dubai's “ambitious expansion plans” and various growth opportunities, Mr Al Haddad said in a presentation.
In June, new legislation set up Salik Company, with a 99-year term that renews automatically for the same period as per the company’s articles of association.
Salik, which has its headquarters in Dubai, can open branches and offices in and outside the emirate.
The emirate’s Roads and Transport Authority is authorised to outsource all or part of Salik’s functions related to the operation and management of toll gates.
Existing toll gates in Dubai can be removed or modified subject to a decree by the chairman of the Dubai Executive Council.
New toll gates can also be added subject to the council’s approval, once the Roads and Transport Authority conducts a “comprehensive traffic study in co-ordination with Salik”.
“Today we have an opportunity to add a gate because of traffic needs and we have provided alternatives … the plan from an engineering standpoint is ready. The timing to add a new gate will be subject to final approval,” Mr Al Haddad said.
Joint lead managers of the IPO include Emirates NBD Capital, EFG-Hermes and HSBC.
Moelis & Company has been appointed as independent financial adviser while Emirates NBD Capital, Goldman Sachs and Merrill Lynch are joint global co-ordinators.
Citigroup Global Markets, EFG Hermes UAE and HSBC Bank Middle East are joint bookrunners.
Emirates NBD is the lead receiving bank. Other receiving banks include Emirates Islamic Bank, First Abu Dhabi Bank, Abu Dhabi Islamic Bank, Mashreq Bank, Dubai Islamic Bank, Ajman Bank, Abu Dhabi Commercial Bank, Al Maryah Community Bank, the Commercial Bank of Dubai and Sharjah Islamic Bank.