Banking on IPOs

Nahla Abul-Ezz, Tuesday 14 Dec 2021

The government hopes to attract more foreign investment through its next batch of initial public offerings, reports Nahla Abul-Ezz

Banking on IPOs
Banking on IPOs

Egypt is offering four state-owned companies for sale on the Egyptian Stock Exchange (EGX) before the end of the year, stated Ahmed Kojak, deputy minister of finance for economic affairs, this week.

The government already offered 10 per cent of the shares in the Abu Qir Fertilisers Company on the bourse last week.

The investment bank EFG Hermes acted as global coordinator and joint placement manager for the selling parties, namely the National Investment Bank, the Industrial Development Authority, Al-Ahly Capital Holding, and the Chemical Industries Holding Company, which relinquished part of their ownership in the offering.

It was explained that in the light of rising prices and the continued growth in demand for fertilisers globally, the Abu Qir Company had doubled its net profits during the current year, reflecting its promising and sustainable growth in this strategic sector of the Egyptian economy.

Kojak stated that the government is working on a three-pronged plan amid the coronavirus crisis to support the economy that includes maintaining economic stability and planned growth rates, offering incentives for economic activities, including the green economy, by encouraging sustainable projects and exports, and giving the private sector a bigger role in the economy, including by making more initial public offerings (IPOs).

Sherine Al-Sharqawi, first assistant to the minister of finance, stressed the importance of the capital market for the state as a strong means of finance, as well as its pivotal role in attracting foreign investment to the Egyptian market.

She cited as an example the IPO for E-Finance for Digital and Financial Investments, which had attracted foreign funds and institutions and had been more than 61 times oversubscribed. Public offerings usually take 18 months to be successful, she added, saying that more were expected soon.

The government intends to offer shares in the New Administrative Capital on the bourse to encourage large companies to sell shares, which will increase the representation of Egyptian companies in the MSCI Emerging Markets Index. This will in turn attract more foreign investments to Egypt, Al-Sharqawi stated.

The companies planned for IPOs are the Eastern Company, which previously offered five per cent of its shares on the local market, Heliopolis for Housing and Development, and Madinet Nasr for Housing and Development.

Observers also expect the state to offer shares in companies owned by the National Service Projects Organisation of the Egyptian Armed Forces. Minister of Planning and Economic Development Hala Al-Said earlier revealed the intention to offer shares in the National Petroleum Company and Safi, a national company for the production and bottling of natural water and vegetable oils.

The stakes offered in both companies will range between 10 and 100 per cent according to demand, with the aim of increasing the share of the private sector in the national economy, Al-Said said.

Banque du Caire may also offer shares for sale. In April 2020, the bank was planning to offer between 20 and 30 per cent of its shares on the bourse, but it shelved the plan due to the coronavirus pandemic.

The Ghazl Al-Mahalla Sporting Club is also expected to offer some of its shares to investors after the club, affiliated to the Misr Weaving and Spinning Company, was turned into a company with a capital of LE200 million.

Managing Director of Bloom Securities Mohamed Fathallah said the Stock Exchange was awaiting the new government offerings, in addition to offering additional shares in listed companies to diversify the market. He added that offering additional shares in government companies such as Abu Qir Fertilisers and Heliopolis for Housing and Development was important to revive the Stock Exchange and build investor confidence.

Mohamed Maher, head of the Egyptian Securities Federation, said that the decline in trading volumes on the Exchange had been the result of the state’s withdrawal from offering large companies for sale and from offering tax exemptions to listed companies.

There had also been a gradual increase in the cost of listing on the Stock Exchange and on the commissions paid to Misr for Central Clearing, Depository, and Registry and the Egyptian Financial Regulatory Authority (EFSA), which are supposed to be non-profit bodies, he said.

A report by the international professional services company Ernst & Young said that due to the pandemic and the resulting losses and economic slowdown, Egypt was the only country in the Middle East and North Africa region that had witnessed an initial subscription during the second quarter of 2021, which was for E-Finance.

IPO yields fell by nearly 50 per cent in the region. During the current year, the EGX has seen two offerings, one for the education services company Taleem and the other being the double listing of Integrated Diagnostics Holdings, which is also listed on the London Stock Exchange.

*A version of this article appears in print in the 16 December, 2021 edition of Al-Ahram Weekly.

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