RIYADH (Agencies): Initial public offering activity in the Gulf is booming, with record offerings this year on the back of surging oil revenues and high investor appetite. Geopolitical unrest and rising inflation may have weighed on markets globally, but the Gulf continues to buck the trend with strong investor demand and double-digit returns on most IPOs.
Despite missing out on last year’s boom led by Riyadh and Abu Dhabi, Dubai’s leading power and utility supplier was the world’s second-biggest initial share sale this year.
Dubai Electricity and Water Authority, or DEWA, drew billions of dollars from investors, generating $6.1 billion in proceeds.
This offering marked the biggest regional IPO since Saudi oil giant Aramco raised over $25 billion back in 2019 and was the second-largest globally after LG Energy Solution.
Pharma chain operator Nahdi Medical Co. was next, striking a $1.36 billion IPO on Saudi Arabia’s main market, followed by Abu Dhabi Ports with $1.1 billion in proceeds.
Amid efforts to increase liquidity and reinvigorate capital markets, the Gulf has come a long way from last year and earlier.
In 2021, ACWA Power Co. was the region’s largest offering, with proceeds amounting to $1.2 billion.
The Saudi-based utility provider was followed by ADNOC Drilling Co., which went public on Abu Dhabi Securities Exchange after a $1.1 billion IPO. Buoyed by high oil prices, the initial share sale spree in the oil-rich region is not expected to halt anytime soon, with several companies lining up for IPOs.
Meanwhile, Fitch Ratings has revised the outlook on Saudi Arabia’s Long-Term Foreign-Currency Issuer Default Rating, or IDR, to Positive from Stable and affirmed the rating at A.
The outlook’s revision reflects the Kingdom’s improvements in its sovereign balance sheet, driven by a higher oil revenue and its commitment to fiscal consolidation.
Government debt and gross domestic product are expected to remain below 30 percent until 2025, the credit rating agency forecast. The Saudi government is also expected to retain significant fiscal buffers, including deposits at the central bank in excess of 10 percent of GDP.
Fitch also expected that Saudi Arabia will record budget surpluses in 2022-2023 for the first time since 2013, equivalent to 6.7 and 3.5 percent of GDP, respectively. During 2022 and 2023, Brent crude oil prices are presumed to average $100/bbl and $80/bbl, while Saudi Arabia’s oil production will average 10.7 million bpd and 11.1 million bpd, respectively.
These would be the Kingdom’s highest sustained levels of oil production, Fitch added.
It noted that Saudi oil giant Aramco aims to increase capacity to 12.6 million bpd in 2025 and 13.3 million bpd by 2027, up from its current 12.2 million bpd.
Adding that a $10/bbl movement in oil prices would change the agency’s budget deficit forecast by 2.3 percent of GDP.
Similarly, a one million bpd difference in production would change its fiscal deficit forecast also by 2.3 percent of GDP.
