Nayifat Finance to IPO in Saudi Arabia to fuel expansion

Riyadh-based lender plans to open five new branches in the kingdom by 2022

Visitors look at stock price information displayed on a digital screen inside the Saudi Stock Exchange (Tadawul). Bloomberg

Nayifat Finance Company, a Sharia-compliant lender based in Riyadh, aims to list 30 per cent of its shares in an initial public offering on the Saudi stock exchange to finance expansion.

“We have identified opportunities for expansion, which will see our loan book grow considerably between now and 2023 in line with the National Transformation Plan and the Financial Sector Development Program which forms part of Saudi Vision 2030,” said Abdulmohsen Al Sowailem, chief executive at Nayifat Finance Company, in a statement on Monday.

Saudi Arabia’s Tadawul – the biggest Arab bourse with half a trillion US dollars in market capitalisation – was upgraded to index provider MSCI’s Emerging Market index in May, bringing the potential for up to $40 billion of additional investment inflows to the kingdom, analysts say.

The government has been implementing reforms to strengthen its capital markets and lure investors – which are providing extra impetus for companies to list shares. Nayifat’s offering follows that of shopping mall owner Arabian Centres on the Tadawul last month, which raised 2.47bn Saudi riyals.

Nafiyat, which received regulatory approval for a public float in March, will use the net proceeds of the listing to grow the company's financing portfolio, add credit cards to its product range and open five new branches in Saudi Arabia by 2022. The company currently operates 24 branches in thirteen regions in the kingdom and aims to expand particularly in remote areas, the firm said.

Nayifat is a non-banking financial institution, or NBFI – other examples of which include insurance firms, venture capitalists and currency exchanges. Established in Riyadh in 2002, the firm is licenced by Saudi Arabian Monetary Authority to engage in activities including consumer, small- and-medium-sized enterprises, lease and credit card finance.

With a current client base of 250,000 customers, it has a loan book of more than 40,000 borrowers, according to Nafiyat’s chairman, Saud Al Dosari. Its profit grew 11.2 per cent year-on-year to reach 172.4 million Saudi riyals (Dh168.8m) in 2018.

The planned IPO, which will have two separate tranches for institutional and retail investors, comprises sale of 36,500,000 ordinary shares, representing 30.041 per cent of the company’s total share capital.

Initially, 100 per cent of shares will be provisionally allocated to the institutional offering and may be reduced to 32,850,000 ordinary shares representing 90 per cent of the total offer, depending on the level of demand by individual investors, the company’s statement said.

The final allotment will be made by July 23. Shareholders will be subject to a six-month lock-up period during which they will be prohibited from selling their shares from the date of the IPO.

Current shareholders – including Falcom Holding Company, which owns 71.68 per cent stake in the company; the chairman with 7.58 per cent and Abdulaziz Al Blehed, who owns 7.04 per cent – will not receive any proceeds from the offering.

“Our aim is to consolidate Nayifat’s place as Saudi Arabia’s premier NBFI, with key pillars of our expansion being consumer finance and our expansion in SME financing and credit card products,” said chief executive Mr Al Sowailem.

“An increasingly stable economic environment and robust regulatory framework – both of which are highly supportive of the SME customer segment – will further enhance our growth objectives.”

The company has appointed AlDhabaan & Partnera and Eversheds Sutherland as legal advisor to the IPO.