|08 August, 2016

Omani firms postponing share sale amid slackness in secondary market

Omani companies are shying away from entering the primary market for raising funds from the investing public.

08 August 2016
Muscat: Omani companies are shying away from entering the primary market for raising funds from the investing public, mainly due to a sluggish trend in the secondary market.

About five Omani companies, which had announced plans to tap the capital market last year, have postponed their initial public offerings (IPOs).

These firms include Truck Oman, Falcon Insurance and a few other state-owned companies. Although Mining Development Oman had announced a plan to raise OMR40 million from the investing public in the second quarter, there has been no progress on that front so far.

Abdullah bin Salem al Salmi, executive president of CMA, in January this year said that as many as five Omani companies, including state-owned firms, were expected to float initial public offerings on the local bourse.

Four state-owned agencies--the State General Reserve Fund (SGRF), the Oman Investment Fund (OIF), the Oman Oil Company and the Oman National Investments Development Company (Tanmia)--jointly promoted Mining Development Oman.

None of the Omani firms so far this year floated an IPO on the Muscat Securities Market (MSM). "The primary reason for lack of initial public offerings is that the market condition is not too encouraging. It will be challenging to get an attractive valuation," said S Suresh Kumar, head of research at Al Maha Financial Services.

"We see limited possibility for companies to come out with an IPO in the third quarter (as well). However, market trends will determine the possibility of companies coming out with IPOs in the fourth quarter."

Falcon Insurance, a subsidiary of Al Anwar Holding, had said last year it plans to float an IPO on the Muscat Securities Market. The Sultanate's insurance regulator, Capital Market Authority, in 2014 had asked national insurance companies to go public within three years (in line with an amendment in the Insurance Companies Law) and that is one of the reasons for Falcon's proposed share offer.

As many as eight locally-incorporated insurance companies, including a reinsurance firm, plans to offer shares to the investing public within the next couple of years to comply with the amendments in the insurance law.

In fact, share offerings of Gulf companies in the second quarter of 2016 plunged by 42 per cent to $274 million, compared with the previous quarter.

The first regional offerings in the second quarter of 2016 were by Al Yamamah Steel Industries, which owns and operates steel plant factories, and had offered 15.24 million shares to the public to raise $147 million, according to a report released by PricewaterhouseCoopers (PwC).

The second offering was by L'azurde Company for Jewellery, which designs, manufactures and distributes precious metals in the Mena region, which offered 12.9 million shares to the public to raise $127 million. Both companies are listed on the Saudi Stock Exchange, Tadawul.

Share offerings in the Gulf Cooperation Council (GCC) region in the second quarter remained low as oil prices and global economic volatility, regional political unrest, as well as the recent UK vote on the referendum to leave the European Union (EU), Brexit, continued to bring uncertainty to GCC markets.

© Times of Oman 2016

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