Saudi Arabia to see more IPOs in tech, retail, healthcare; set for bumper 2021

The initial public offering (IPO) market in the region was relatively muted during the peak lockdown in 2020 after a promising start in the first quarter. However, activity returned towards the year-end with the listing of Dr. Sulaiman Al Habib Medical Services Group Co. and BinDawood Holding on the Saudi Stock Exchange (Tadawul).

The IPO market in Saudi Arabia proved to be more resilient than expected in 2020, when the world was hit by a pandemic; the momentum is anticipated to continue in 2021 with cautious approach. In 2019, Tadawul also completed its full inclusion on the MSCI emerging markets index.

Experts say that sectors like energy, healthcare, retail and technology will have a strong pipeline of IPOs this year on the main market and Nomu Parallel Market.

“We anticipate IPO activity in 2021 and beyond to take place across a variety of sectors including energy, technology, media & entertainment, consumer products and retail, and more,” Gregory Hughes, MENA IPO and Transaction Diligence Leader at Ernst & Young, told Argaam.

Most of the IPOs that were listed during 2020 in Saudi Arabia reported strong performance and positive returns, relative to their price, as of March 31, 2021. Sulaiman Al Habib IPO was 83 times oversubscribed as investors injected nearly SAR 217 billion, whereas BinDawood’s retail offering was 1,396% oversubscribed.

Riyadh-based independent analyst Kamal Goyal pointed out that all the IPOs announced in 2020 are trading above their listed prices, which is indicative of a bullish phase. “Massive oversubscription of the IPOs indicates that the investors do possess investible funds and have an optimistic outlook on investing in Saudi companies. It appears that the pandemic had minimal effect on the recently launched IPOs,” he stated.

Tadawul IPO

Earlier in April 2021, Tadawul transformed itself into a holding group under the name “Saudi Tadawul Group” ahead of the planned IPO this year. The group included four subsidiaries, namely Saudi Exchange, Securities Clearing Center (Muqassa), Securities Depository Center (Edaa), and Wamid.

The transformation established the necessary platform to realize the group's strategic objectives and strengthen its infrastructure ahead of the IPO this year, Group CEO Khalid Al-Hussan said during a press conference held to announce the transformation.

Kamal Goyal, Group CFO and chief investment officer at Alriyadah Investments, pointed out that all the IPOs announced in 2020 are trading above their listed prices, which is indicative of a bullish phase. “Massive oversubscription of the IPOs indicates that the investors do possess investible funds and have an optimistic outlook on investing in Saudi companies. It appears that the pandemic had minimal effect on the recently launched IPOs,” he stated. 

Read: Tadawul transforms into holding group ahead of IPO in 2021

2021 and beyond

The robust and solid finish to 2020 provided an impetus to the Saudi IPO market going into 2021, as there is a strong pipeline of candidates preparing to go public on the main market and Nomu. With the nationwide rollout of vaccines, the business sentiment is slowly recovering in the Kingdom after months of volatility.

“Many Saudi companies have announced their plans for IPOs in 2021. I expect to see a healthy pipeline of IPOs in months to come,” Goyal asserted.

The launch schedule of an IPO is always difficult to predict since processes can be delayed due to inadequate preparation and other external factors outside of an issuer’s control. But companies have adapted to a new way of working, interacting, and communication with investors and other key stakeholders, Hughes said.

“We are seeing an increased interest in the direct listing route,” he concluded.

Write to Paromita Dey at paromita.d@argaam.com