Lulu Retail disappoints at debut
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Shares of Lulu Retail Holdings closed unchanged after its $1.72 billion IPO in Abu Dhabi, marking a subdued debut for a major Middle Eastern listing for the second time in recent weeks.
Analysts highlight margin expansion as a critical factor for Lulu’s stock performance. The CEO told Bloomberg News that net profit margins are expected to increase to 5% in the medium term, up from 2.6% in 2023. “The stock could re-rate higher once investors see consistent execution on margin improvements,” said Dipanjan Ray, portfolio manager and head of research at Emirates NBD Asset Management. Ubhar Capital’s Gupta agreed, noting, “Lulu presents an attractive case for potential margin expansion, and the stock price should eventually reflect this as growth and improvements are realized.”
Lulu Retail disappoints at debut
The hypermarket chain operator ended Thursday’s trading at **2.04 dirhams ($0.56)** per share, recovering from earlier losses of up to 2.5%. The UAE's largest IPO of the year was priced at the top of its marketed range. Demand was strong, with all shares booked within an hour of opening last month, prompting Lulu’s owners to increase the deal size to 30% from 25%. The IPO attracted prominent investors, including Saudi Arabia’s Public Investment Fund and Singapore’s GIC Pte.Interest didn't translate in shares rise
“More and more people subscribe to the IPO, lured by high oversubscription numbers, expecting limited allotment,” said Neetika Gupta, head of research at Ubhar Capital. “However, this doesn’t always translate to sustained secondary demand once the shares hit the market.” While IPOs in the Middle East have typically delivered strong early returns, Oman’s OQ Exploration & Production dropped 8% in its debut two weeks ago after raising a record $2 billion. Similarly, Spinneys 1961 Holding Plc, which secured $374 million in May, saw muted performance and continues to trade near its offer price, despite both offerings being oversubscribed.Boost to founder’s net worth
The IPO increased founder Yusuff Ali’s net worth to $7.1 billion, solidifying his status as the UAE’s second-richest private individual, according to the Bloomberg Billionaires Index. Ali, originally from India, arrived in the UAE in 1973 and opened his first grocery store a year later. Since then, Lulu has expanded into one of the Middle East’s largest hypermarket chains, serving over half a million shoppers daily across 240 stores in six Gulf countries and employing more than 50,000 people. The company reported a profit of $192 million last year.Margin growth key to stock performance
Analysts highlight margin expansion as a critical factor for Lulu’s stock performance. The CEO told Bloomberg News that net profit margins are expected to increase to 5% in the medium term, up from 2.6% in 2023. “The stock could re-rate higher once investors see consistent execution on margin improvements,” said Dipanjan Ray, portfolio manager and head of research at Emirates NBD Asset Management. Ubhar Capital’s Gupta agreed, noting, “Lulu presents an attractive case for potential margin expansion, and the stock price should eventually reflect this as growth and improvements are realized.”