Friday, Jun 15, 2012
Asif Jabbar, CEO of the retail-focussed Alif Investments, is in a bit of dilemma. He has made up his mind to seek a stock market listing and has started the wheels rolling internally to make it happen. And that is when the uncertainty crept in.
“While the initial consideration was to have a local listing, independent advisers have been telling us to look to other options, such as one in the London alternative market,” said Jabbar. “Being a Sharia company imposes its own requirements on the way the company goes public and these are the details that are being looked into. All options are on the table.”
This is where Dubai will need to do more to ensure that local mid-sized businesses are given a viable stock market option to do their listing here itself. For sure such a step would create a lot of depth to the financial markets and for the listing SMEs access to alternate funding beyond those offered by banks and private equity.
A sentiment Hassan Al Hazeem, managing director at Intercoil Group, can relate to and with good reason. His company has a prominent ranking in the recently created Dubai SME 100 rankings.
“In general, SMEs usually have two concerns when it comes to private equity - control over management and the exit strategy of the private equity,” Al Hazeem said. “Based on our experience, investors are keen to invest in SMEs with a clear vision and a viable business plan, and thus, a secondary market will definitely be a growth catalyst for the SME sector.
“If a well-structured secondary market for SMEs is established, they will be more inclined to finance their growth through the secondary market rather than private equity.”
Certainly, the authorities have repeatedly sounded out their extremely favourable thoughts on the issue. In fact, the creation of the dedicated Dubai SME index is seen as one of the platforms that would lead to the eventual creation of a dedicated stock market for SMEs.
Skeptics may suggest that the present is no time to create new bourses. The primary bourses in the country have been starved off quality IPOs as a consequence of the wider malaise in the global financial markets. To create a dedicated SME market now would be expending a lot of energy without the results to show for it, they argue.
This is at the macro level. SMEs themselves would need to undergo major transitions before they can be deemed ready to take the step towards being publicly traded.
According to Hasan Rizvi, partner at the law firm of Taylor Wessing, “Although expansion of the SME sector can be crucial drivers for local and regional economic development, entities evaluating listings should consider whether they are prepared to operate and adapt in a more regulated environment. To increase preparedness for their continued business growth and to avail the benefits of successful listings, SME stakeholders should emphasise streamlining of integral operational and regulatory aspects such as corporate governance, financial management, compliance policies and oversight functions.”
That does sound like a daunting list of things to do. But missing out on any one of these elements could prove a self-defeating exercise for SMEs. Being a publicly listed company requires not just a change in strategies but a complete rewriting of the mindsets of their owners. Nothing less will do.
By Manoj Nair Associate Editor
Gulf News 2012. All rights reserved.
