Lulu Retail Launches One of UAE’s Largest IPOs of 2024
Lulu Retail Holdings, a major player in the hypermarket industry across the Middle East, launched its much-anticipated initial public offering (IPO) on Monday. Analysts and bankers believe this could be the United Arab Emirates’ biggest IPO of the year, reflecting the ongoing retail boom in the region.
The conglomerate, which operates more than 240 stores across the six Gulf Cooperation Council (GCC) countries, is set to list on the Abu Dhabi Securities Exchange. The listing will take place between October 28 and November 5, with trading expected to begin on November 14. According to the company’s IPO documentation, more than 2.58 billion shares will be offered, representing a 25% stake in the company. Sources involved in the transaction estimate the IPO could raise between $1.7 billion and $1.8 billion, though Lulu has not officially commented on the expected valuation.
Founded in 1974 by Indian entrepreneur Yusuff Ali, Lulu has grown to become one of the region’s leading retail chains. The company is following the trend of grocery firms seeking public listings, such as Spinneys, which went public earlier this year, and Saudi-based BinDawood Holding, which listed in 2020.
Lulu CEO Saifee Rupawala expressed confidence in the company’s future, citing a $100-billion retail market opportunity in the GCC over the next five years. “We are confident that Lulu will continue to be the place where the world comes to shop,” Rupawala said in the IPO document. He also highlighted Lulu’s potential for expansion in Saudi Arabia, which remains a key market for the company.
The Middle East retail sector has seen a shift in consumer preferences, with many shoppers leaning towards local and regional brands. Companies such as Alokozay have emerged as alternatives to global giants like Coca-Cola and Pepsi. Meanwhile, Western brands like Starbucks have faced boycotts in the region, partly due to public sentiment concerning Israel’s recent military actions in Gaza.
Lulu’s IPO also arrives amid a wave of grocery store listings in the region. Earlier this year, Saudi Arabia’s Savola Group announced plans to list its grocery subsidiary, Panda Retail, while the Saudi wealth fund acquired a 30% stake in Tamimi Markets ahead of its planned IPO. The region’s retail market is booming, as seen by these multiple public offerings and acquisitions.
Back in 2022, it was reported that Lulu was exploring an IPO and had enlisted investment bank Moelis & Co to guide the process. Now, with the IPO underway, Lulu aims to pay out a total dividend of 75% of annual distributable profits after tax, with two payouts each year, subject to relevant conditions.
Financially, Lulu Retail has shown solid growth. The company’s revenue for the first half of 2024 reached $3.9 billion, up 5.6% compared to the same period last year. Full-year revenue for 2023 also showed a 5.6% increase, hitting $7.3 billion. The growth was driven by increased sales in existing stores, network expansion, and improvements in the company’s online channel. Core earnings for the first half of 2024 stood at $391 million, representing a 4.3% increase from last year, while annual core earnings for 2023 rose 7.2%, reaching $753 million.
Lulu’s IPO marks a significant milestone for the company and underscores the growing strength of the retail sector in the Gulf region. With consumer preferences shifting towards local brands and an expanding middle class, the GCC retail landscape presents a promising opportunity for investors and companies alike. As the IPO progresses, Lulu Retail aims to leverage these trends, further expanding its market presence and providing value to shareholders through consistent growth and dividends.