Lulu IPO: Share prices close flat on ADX trading debut

Company raised $1.72 billion from its initial public offering, making it the UAE's largest listing so far this year

A Lulu hypermarket in Riyadh. Bloomberg

Shares in the UAE-based retail firm Lulu Group ended flat on their debut on the Abu Dhabi Securities Exchange on Thursday, after the company raised Dh6.32 billion ($1.72 billion) from its initial public offering, making it the country's largest listing so far this year.

Lulu, trading under the ticker symbol “LULU”, closed at its opening price of Dh2.04 after dropping to as low as Dh1.99 earlier in the day. It was the most traded stock on the ADX, with about 248 million shares exchanged by the closing bell.

The IPO, priced at the top of the range, was oversubscribed by more than 25 times across all tranches (excluding cornerstone investors) and received aggregate demand of more than Dh135 billion from local, regional and international investors.

Analysts attributed Lulu's weak trading debut to “price discovery” in the market.

“This trading pattern suggests an active price discovery process as market participants work to establish a fair value for the shares of this significant regional retailer,” Joseph Dahrieh, managing principal at UK-based broking firm Tickmill, told The National.

The price could continue to see some volatility as more investors interact with the stock, he added.

“Lulu’s addition to ADX’s growing portfolio reflects the UAE's strides in cultivating a robust, multi-sector economy,” said Ghannam Al Mazrouei, chairman of ADX. “As this year’s largest IPO in the UAE, Lulu drew incredible demand from a global investor base, solidifying ADX’s role as a premier gateway for capital flows.”

LuLu, one of the largest supermarket chains in the Gulf, founded by Indian-born businessman MA Yusuff Ali in 1974, operates more than 240 hypermarkets and shopping malls in 10 countries including India, Egypt, Malaysia and Indonesia.

The retailer is targeting a total dividend payout ratio of 75 per cent of annual distributable profits after tax, paid semi-annually. The company aims to pay dividends for the six months ending December 31 and in the first half of next year.

The listing will “provide an opportunity for local and international investors to benefit from the opportunity in our region and the growth and ambition of Lulu Retail”, said Mr Ali, Lulu’s chairman and managing director.

Lulu Retail plans to open an additional eight branches this year in the UAE, Saudi Arabia and Oman. It has opened 13 shops in the Emirates so far this year and aims to add about 19 in 2025, mainly in the UAE and Saudi Arabia, officials said last month.

The Abu Dhabi-based company expects up to 10 per cent revenue growth this year, its chief financial officer Prasad KK told The National. “The UAE is our main market and Saudi Arabia is our growth market. We are growing across the two markets,” he said.

Lulu’s revenue for the first half of this year grew 5.6 per cent annually to $3.9 billion, while its earnings before interest, taxes, depreciation and amortisation rose by 4.3 per cent during the same period.

“Our commitment to investing in growth is stronger than ever, evident in the opening of 16 new stores so far this year … we’re confident in meeting our guidance targets for 2024 and beyond,” said Saifee Rupawala, chief executive of Lulu Retail.