There was a high demand on the Egyptian Exchange (EGX) in the past two years as a source of finance, leading many companies to go public by listing their companies and then offering shares by holding an Initial Public Offering (IPO).
Other private and state-owned companies have announced their intention to increase their capitals through an IPO. However with the current downwards trend the market is experiencing, it would seem that such plans may be postponed.
Despite holding major conferences to market the role of the EGX in raising capital, its Chairman Mohamed Omran has not been approached by new companies since the beginning of the year, neither state owned nor private.
Plans for 2016
While the market awaits the government to follow through with its plans, investment banks stated that despite the fluctuations of the global capital market, this year will see some IPOs.
Vice chairman and CEO of Prime Holding Mohamed Maher said the company is currently preparing the pricing and capital percentage for the IPO of real estate company Misr Italia.
“We are planning to have an IPO during the first half of 2016,” Maher said and that IPOs are necessary for the market since it need new products. The market capital has shrunk significantly during the past. The success of any IPO depends on proper price evaluation and the company’s ability to maintain profitability.
Chairman of Sigma Capital Ahmed Marwan said they plan to hold two IPOs by mid-2016 with a capital of EGP 200m. One is operating in the pharmaceuticals and the other in the construction sector.
CEO of investment bank CI Capital Mahmoud Atallah said it will arrange for at least three IPOs in the stock market in 2016. At least one IPO will be introduced in the construction, food, and hotel sectors.
Earlier this month, Chairman of Arabian Food Industries Company (Domty) Omar El-Damaty said they planned since 2014to hold an IPO in March.
Head of technical analysis at Osool Securities Brokerage Islam Al-Saeed said that unless the IPO is for a government-owned company then it will not be beneficial. “The market cannot handle any exaggeration in price evaluations at the moment,” he said. Private companies care about collecting the needed finances and not the future price of the stock.
“The government-owned companies care about the future price because it [the government] will seek to introduce other companies so it is vital that the value of the share remains high.”
Government-owned companies
The plan to hold IPOs for state-owned companies was officially introduced in 2015. After meeting with Omran in February, Egyptian Prime Minister Sherif Ismail, then minister of petroleum, also announced the government’s plan to choose between ten companies to list them in EGX.
The legislative law of EGX was also amended to allow state-owned projects to collect necessary financing by holding an IPO, leading Ismail to announce the government’s intentions to offer some petroleum related projects such as the projects of Egyptian Petrochemicals Holding Company (ECHEM).
A month after the meeting, Misr Oil Processing and Fertilisers Company (MOPCO) listed in EGX with a capital of EGP 2.3bn.
In April 2015, EGX released a statement in which it announced that it began negotiations with three additional petroleum companies; Middle East Oil Refinery MIDOR, the Egyptian Company for Refrigeration (Gas Cool), and El-Neel Oil Marketing Company are seeking to list on the Egyptian stock exchange.
Omran said the three companies were looking to list with a combined total capital of EGP 8.5bn. MIDOR’s plan was to list shares worth $1.1bn while Gas Cool planned to list share worth EGP 125.5m. El-Nile would have offered EGP 50m.
Not all IPOs were successful however. DBK Pharmaceutical’s IPO saw a subscription rate of 1.17%, which led to delaying the IPO. IT Synergy also took a hit when investors took only 30% of its offered shares, pushing the company to look for a strategic investor to buy a share of its stocks.
The slowdown
In November, MIDOR decided to suspend its plans to launch stocks on the stock market after it obtained the funds necessary for the company’s expansion plans.
In December, several companies including AT Lease, InterCairo Aluminium Industry, and MOPCO all requested to delay their offerings. MOPCO’s sought to raise EGP 2.2bn in capital while AT Leasr and InterCairo Aluminium’s offered capital would have been EGP 200m, each.
Giza Systems’ also delayed its IPO in January. CEO of Beltone Capital Hazem Barakat, which owns 60% of Giza Systems, said the company’s decision is because of the turmoil in the local, regional, and international markets.
The private companies of 2015
After announcing its plans to hold an IPO in September 2014, food manufacturing company Edita Food Industries (Edita) held an IPO in March the following year. The company offered 30% of its shares and was 4.5 times oversubscribed.
In June 2015, real estate company Emaar Misr announced its plans to offer 600m shares, which equated 13% of the company’s capital, in the stock market at a price ranging between EGP 3.5 and EGP 4.25 per share. Only 15% of the offered shares, 90m, were offered in an IPO while the remaining 510m shares were made available in a private offer.
The past year also witnessed two cross-border IPOs. The first was for Orascom Construction, which debuted in the capital markets of the UAE and Egypt, collecting over $185m. The second was for Integrated Diagnostics Holding, which raised $334m through its IPO in the Egyptian and London Stock Exchange.
