22/08/2024
In a significant move for the Middle Eastern financial markets, the Dubai Taxi Company (DTC) has announced its intention to launch an Initial Public Offering (IPO). This follows a recent law that officially recognises the prominent transport solutions provider as a public joint-stock company with its own financial and administrative independence. The announcement has generated considerable interest, with many eager to understand the specifics of this public debut.
What is an IPO?
An Initial Public Offering, or IPO, is the process by which a privately held company offers its shares to the public for the first time. This allows the company to raise capital from public investors and typically results in the company being listed on a stock exchange. For DTC, this marks a pivotal moment in its history, transitioning from a government entity to a publicly traded company.
According to the DTC's 'intention to float' document, a substantial number of shares will be made available to the public. Specifically, over 624.75 million shares will be offered, each with a nominal value of Dh0.04. This offering represents a 24.99 per cent stake in DTC's total issued share capital. The company's share capital has been established at Dh100 million, comprised of 2.5 billion fully paid shares. These are existing shares currently held by the Department of Finance for the Government of Dubai, acting as the selling shareholder. It is important to note that the size of the offering and the allocation for each tranche can be subject to change at any point before the subscription period closes, provided all applicable laws and necessary approvals are secured.
Who Can Invest?
The DTC's IPO is structured to accommodate a diverse range of investors. The offering will be segmented into different tranches:
- UAE Retail Offering: This tranche is specifically designated for retail and other individual investors residing within the United Arab Emirates.
- Professional Investor Offering: This segment is designed for professional investors and other eligible entities in various countries outside the United States.
- Reserved Tranches: A portion of the offering has been allocated to specific institutional investors. 5 per cent of the total offering will be reserved for the Emirates Investment Authority, and another 5 per cent will be set aside for the Pensions and Social Security Fund of Local Military Personnel.
Subscription and Trading Timeline
Mark your calendars! The subscription period for the IPO has a clearly defined schedule:
- UAE Retail Offering Subscription Period: Expected to commence on November 21, 2023, and conclude on November 28, 2023.
- Qualified Investor Offering Period: This period will run concurrently, starting on November 21, 2023, and closing on November 29, 2023.
The anticipated date for the completion of the offering and the subsequent admission to trading is in December 2023. This includes the crucial step of obtaining approval for listing and trading on the Dubai Financial Market (DFM).
For investors who adhere to Islamic finance principles, the DTC's IPO has been reviewed and deemed compliant with Sharia principles by the Internal Sharia Supervision Committee of Emirates NBD Bank. However, investors are strongly advised to conduct their own thorough due diligence to independently verify the Sharia compliance of the offering according to their personal understanding of Islamic laws.
Dividend Policy
A key consideration for many investors is the company's dividend policy. DTC has outlined its intentions regarding dividend payments:
- Dividend Frequency: Starting from the fiscal year 2024, the company plans to distribute dividends twice annually, typically in April and October.
- Initial Dividend: In anticipation of the financial performance in the fourth quarter of 2023, DTC expects to distribute an initial dividend of at least Dh71 million, scheduled for payment in April 2024.
- Future Dividend Framework: For the fiscal year 2024 and subsequent years, DTC intends to implement an earnings-linked dividend framework. This framework stipulates that a minimum of 85 per cent of the company's annual net profit will be available for distribution for the relevant financial periods. This commitment underscores DTC's focus on delivering value to its shareholders.
Key Entities Involved in the Offering
The successful execution of an IPO involves a network of financial institutions and advisors. The DTC has appointed several key players to manage this significant undertaking:
- Independent Financial Advisor: Rothschild & Co Middle East Limited.
- Joint Global Coordinators and Joint Bookrunners: Citigroup Global Markets Limited, Emirates NBD Capital PSC, and Merrill Lynch International.
- Joint Bookrunners: EFG-Hermes UAE Limited and First Abu Dhabi Bank PJSC.
- Lead Receiving Bank: Emirates NBD Bank.
- Other Receiving Banks: A consortium of reputable banks, including Abu Dhabi Islamic Bank, Ajman Bank, Commercial Bank of Dubai, Dubai Islamic Bank, Emirates Islamic Bank, First Abu Dhabi Bank, and Mashreq Bank, will act as receiving banks.
About Dubai Taxi Company (DTC)
Dubai Taxi Company boasts a significant presence in the UAE's transportation sector. As of June 30, 2023, it holds the position of the number one taxi operator in Dubai, commanding an impressive 44 per cent market share. Established initially as a taxi company in 1994, DTC has strategically expanded its service portfolio over the years. Beyond its core taxi services, the company now offers a range of mobility solutions, including limousine services, bus transportation (catering to both school and commercial needs), and last-mile delivery services utilizing delivery bikes. This diversification demonstrates DTC's adaptability and commitment to meeting evolving market demands.
FAQs
The subscription period for UAE retail investors runs from November 21 to November 28, 2023. For qualified investors, the period is from November 21 to November 29, 2023.
What is the expected listing date?
The completion of the offering and admission to trading on the Dubai Financial Market is expected in December 2023.
DTC is offering over 624.75 million shares, representing 24.99 per cent of its total issued share capital.
Will DTC pay dividends?
Yes, DTC intends to pay dividends twice a year starting from fiscal year 2024. An initial dividend of at least Dh71 million is expected in April 2024 for Q4 2023 performance. For future years, at least 85% of net profit will be distributed.
Is the IPO Sharia-compliant?
The offering has been deemed compliant with Sharia principles by Emirates NBD Bank's Sharia Supervision Committee. However, investors should conduct their own due diligence.
The upcoming IPO of Dubai Taxi Company is a noteworthy event that offers a compelling investment opportunity. With a strong market position, a diversified service offering, and a clear dividend policy, DTC is poised for continued growth and success as a publicly traded entity.
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