Lulu Retail goes public with landmark IPO in the UAE

Lulu Retail Holdings, a key player in the Middle East's hypermarket sector, has officially launched its initial public offering (IPO) on Monday, signaling a significant moment for the UAE's retail industry. Bankers estimate that this offering could become the largest IPO in the UAE this year, capitalizing on a retail spending surge in the region.
The IPO, scheduled from October 28 to November 5, will offer over 2.582 billion shares, with trading expected to commence on the Abu Dhabi Securities Exchange on November 14, according to the company's IPO document. Sources involved in the transaction suggest that the offering could raise between $1.7 billion and $1.8 billion, representing a 25% stake in the company. However, Lulu has opted not to comment on the expected valuation of the deal.
Founded in 1974 by Indian entrepreneur Yusuff Ali, Lulu operates more than 240 stores across the Gulf Co-operation Council (GCC) countries. The company joins a growing list of grocery firms going public, including UAE-based Spinneys earlier this year and Saudi grocery retailer BinDawood Holding, which listed in 2020.
In the IPO document, Chief Executive Saifee Rupawala expressed confidence in Lulu's future, highlighting a $100 billion market opportunity within the GCC retail sector over the next five years. He also indicated that Lulu's business in Saudi Arabia is poised for further growth.
Amid shifting consumer preferences, many in the Middle East are gravitating towards local brands. Alternatives to global giants, like Alokozay as a competitor to Coca-Cola and Pepsi, have emerged, while some Western brands face backlash due to ongoing geopolitical tensions.
The IPO announcement follows recent moves in the grocery sector, with Saudi Arabia's Savola Group planning to list its grocery subsidiary, Panda Retail, and the kingdom's wealth fund acquiring a 30% stake in Tamimi Markets in anticipation of its IPO.
Lulu's IPO document also reveals the company's commitment to a total dividend payout ratio of 75% of annual distributable profits after tax, with plans to distribute dividends biannually, subject to certain conditions.
For the first half of 2024, Lulu reported revenues of $3.9 billion, a 5.6% increase compared to the previous year. The company's full-year revenue for 2023 also rose by 5.6% to $7.3 billion, driven by sales growth from existing stores and expansion of its store network, as well as increasing revenue from its online platform. Core earnings for the first half of 2024 stood at $391 million, reflecting a 4.3% annual increase, while annual core earnings for 2023 rose 7.2% to $753 million.

As Lulu Retail Holdings embarks on this significant IPO journey, it aims to solidify its position as a leading retail destination in the region, poised for further growth in a rapidly evolving market.