Saudi Arabia: In a vote of confidence in the economy of Saudi Arabia and its capital markets, BinDawood Holding, one of the Kingdom’s leading retailers, is to list its shares on Tadawul in an initial public offering (IPO).

Ahmed BinDawood, CEO of the company that owns the eponymous supermarkets and the Danube chain, said the time is right for the listing despite the economic volatility of the pandemic lockdowns and the recent introduction of 15 percent value-added tax (VAT).

“There have been so many ups and downs since 2008, when we had only four stores. Now we have 73. Every time, we come through stronger,” he said.

He added that in the first half of 2020, when the COVID-19 outbreak first hit the global and Saudi economies, revenue was “resilient,” up 22 percent over the same period last year.

Net income for the first six months was 82 percent higher, driven by “pantry restocking” and higher domestic food consumption as more people stayed at home and ordered food online.

BinDawood has invested significantly in its online business even before the pandemic affected physical shopping.

It is the market leader in the western region, including the big population centers of Makkah and Madinah.

On the VAT rise, BinDawood said consumers and businesses have managed the change to a higher rate better than they had the initial introduction of 5 percent VAT at the start of 2018. “We have a clearer idea and know about the implications of VAT now,” he added.

The company plans to sell some 22.86 million shares, or 20 percent of its existing capital, at a price yet to be determined.

Most of the shares will go to institutional investors in the Kingdom and foreign qualified institutions, but 2 percent are likely to be offered to retail investors.

The IPO will be a “cash out” exercise, BinDawood said, with existing shareholders raising money via the share sale and no new cash raised.

He added that the company has zero borrowings and a healthy balance sheet, and could fund expansion — likely to remain in Saudi Arabia for the time being — through its own resources.

But the IPO listing is valuable as a means of strengthening governance, and he does not rule out using the capital markets for funding in the future. “It gives us more options on capital raising,” he said.

BinDawood highlighted the fact that Saudi Arabia has a relatively low level of penetration of what he termed “modern retail,” with 41 percent in the Kingdom compared to 70 percent across the Gulf Cooperation Council member states and 85 percent in the UAE.

He added that BinDawood would welcome “cornerstone investors” in the form of big Saudi or international institutions. “They would help stabilize the share price in future,” he said.

Details on pricing of the shares and the value of the offering will be made known when the prospectus is published soon. American banking giants Goldman Sachs and JP Morgan advised on the IPO.