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Not many local firms lining up

According to official sources two companies have recently approached them showing their interest to launch their IPOs. Though these companies have not yet formally applied for obtaining the necessary permission.

The industrial assets of Abu Dhabi's disbanded General Industrial Corporation (GIC) which have been transferred to a new Company-General Holding Company (GHC) would be sold out through IPOs. This mode of privatisation stands for Abu Dhabi's unflinching commitment towards withdrawing its stake in industrial businesses and focusing on providing maximum facilities to the private sector.

After taking possession of six industrial concerns, manufactures fodder, pipes, iron and steel, and cement, the GHC is working with HSBC, its financial consultants on chalking out a strategy to launch IPOs for selling out these companies.

The process would be kicked-off with an IPO of Emirates Foodstuff & Mineral Water Company which which would be launched next month, though it was planned for the current month.

But, talk of the town is a jumbo IPO of Dh1.5 billion being launched by Al Adaar, a real estate company which is a subsidiary of Mubadala Development Corporation. It is offering 55 per cent shares to the general public while remaining will be retained by the founders, creating excitement among investors at the Abu Dhabi Security Market where they have started planning to to pool resources to subscribe to the biggest IPO of the country.

Some share analysts believe that Al-Adaar IPO have overridden sentiments at the stock market where prices were seen lackluster despite good corporate results during the third quarter.

The investors are busy arranging finances from the banks as euphoria is building up with the Government of Abu Dhabi granting a prime piece of land to the company. Investors say that despite being a heavy weight IPO, it will be oversubscribed but may not break the record set by Finance House with 74 times, early April this year.

With total 50 companies listed on the ADSM, the pace to enlist companies on the bourses has been depressingly slow despite a cabinet decision fixing the April 2005 deadline.

The Dubai Financial Market, however, is active on this front by following up with 19-20 Dubai based companies. These companies may take four-five for the formal listing on DFM.

FAMILY FIRMS: The family firms hold the show in the country by controlling 85-90 per cent of the business activity. Reason behind their poor interest in going public is their style of doing business, which is more closely as running sole proprietorship. Not many businessmen wants to disclose financial of their companies or wanted to be answerable to their board of directors which could have members from outside their group or their family and to the shareholders.

Secondly, the need for finances to expanding company's operations is also not a problem for many UAE companies; so many ask why they raise finances from the capital market when banks take care of them.

Some financial analysts believed that the complex issues regarding the ownership of family firms might be a reason for not getting enlisted on the share market. Which is why a draft law was withdrawn recently.

MUTUAL FUNDS: At least two banks are planning within next two months time to launch mutual funds or Islamic Funds in the country to promote the secondary market. Some analysts say that the regulatory framework governing the secondary market instruments needs to be strengthened in a way that it is made more transperent. The regulators should ensure that the Fund managers are people of integrity who take care of the transperency factor.

If the rules and regulations for Funds are made flexible and more responsive to the market needs insuring protection of investors rights while on the other hand provide enough room for the funds to grow and attain a desired status to contributing towards the economy as 160 -Islamic Funds in Saudi Arabia have been doing making Kingdom stock market biggest in the Arab world. |