The estimated $1.4 billion LuLu initial public offering (IPO), coming close on the heels of the $375 million Spinneys issue in April this year, is set to trigger a rush for public listing among retailers, especially in the grocery segment, in the Middle East and North Africa (MENA) region, market experts said.

The region is projected to see as many as 30 IPOs in the short-to-medium term, mopping up an estimated $30 billion in proceeds, and leading to a whopping $100 billion in total market cap, the latest market research revealed.

Strong fundamentals such as stability, sustainability and scalability are cited to drive the IPO surge among the region’s retail and grocery market players.

Low level of public representation of retail players in MENA – the currently listed companies are estimated to account for just 10 per cent of the total GMV (gross merchandise value) as against the 60 per cent in the Western market – along with the higher potentials for revenue earnings compared to their global peers are the other factors which are to drive the IPO surge in MENA.

“Looking ahead, the IPO pipeline appears strong, with the grocery sector potentially witnessing $100 billion worth of IPOs by 2030,” the latest market research by RedSeer, a global consultancy, said.

“We estimate that over 30 such companies can go IPO [during the period], creating a total market cap of about $100 billion and $30 billion in proceeds,” RedSeer said.

Significantly, the expected rush for public listing among market players comes at a time when grocery sales in MENA are projected to reach a whopping $114 billion in 2024 from an estimated $93 billion in 2019.

The segment is estimated to account for 25 per cent of consumer spending in the region.

Despite the surge in grocery sales in the region, there is a significant lack of grocery representation in public markets in terms of listed companies, with listed players capturing less than 10 per cent of the total MENA grocery GMV currently.

Grocery sales in MENA are projected to reach $114 billion in 2024 from an estimated $93 billion in 2019. Image: Shutterstock

Digital, traditional players in the IPO list

As per the market research, the list of retailers and grocery market players likely to hit the market with IPOs over the next few years includes digital players such as Careem, Noon, Hunger Station, ninja, Rabbit, Breadfast, To You and Nana and traditional players such as Grandios, Kazyon, Choithrams, Al Madina, Nesto, Seoudi, Viva, Al Raya and West Zone.

While Talabat is expected to follow with an IPO after the current LuLu issue – the Talabat issue is expected to be in Q4 2024 on the Dubai Financial Market – a host of sector players are believed to be currently either in various levels of preparation or planning to go public in the near-to-mid-term, industry experts said.

“Given that we already have large grocery chains and hyperlocal players that are growing and profitable, there is an opportunity to unlock value through going public in the region,” Sandeep Ganediwalla, Dubai-based Partner at Red Seer Strategy Consultants, told Arabian Business.

“We have already seen Spinneys, LuLu and Talabat IPOs either announced or already trading in the last few months,” he said.

Ganediwalla said consumer spending on groceries has been growing consistently on the back of population growth and changing consumer behaviour in the UAE and the wider MENA region.

“This spend is now sizable already at about $115 billion this year in our region,” he said. Sector experts said the build-up on the part of several retail and grocery segment players to test the market is because of the growing anticipation that they can get listed on higher revenue multiples than average global benchmarks.

The rising IPO trend in the sector, which commenced in the first half of 2024 with Spinneys hitting the market, also comes amidst the heating up of the IPO market in MENA, driven by a rising share of B2C companies, the RedSeer study said.

The region’s IPO market, which registered around 25 issues in 2018, peaked in 2022 with a doubling of the number of issues.

The rising IPO trend in the retail sector began in the first half of 2024, with Spinneys entering the market

The surge was led by both government-owned companies and B2C companies in the private sector, including many successful startup ventures.

The study, however, projected the number of new issues overall to see a gradual dip currently.

IPO rush to have multiplier effect on region’s retail ecosystem

Market experts said the expected surge in IPOs will have a multiplier effect on the entire retail ecosystem, especially in the grocery segment.

“The rush of IPOs will lead to driving large-scale investments in the sector, besides fuelling innovation and a cycle of growth benefiting a wide range of stakeholders,” a Dubai-based management expert said.

The public-listing drive is also expected to see major changes in market dynamics, with the sector expected to see a number of strategic partnerships among players, besides merger and acquisition deals, benefitting smaller players in the sector.

It will also lead to the emergence of a slew of private labels.

“The expected IPO rush is also projected to see seeding of more startup ventures, spike in research and development (R&D) activities in the sector, attracting higher levels of venture capital (VC) and private equity (PE) funding for ventures in the sector, besides attracting large-scale foreign investments,” RedSeer said.

“This is also expected to lead to large-scale job creations and a surge in tax revenue to the government kitty,” it said.

Source: https://www.arabianbusiness.com/markets/equities/ipo/lulu-ipo-more-retailers-across-mena-now-eye-ipo-up-to-100bn-in-market-cap-on-the-way