Egypt resumes IPO market with stakes in 4 state companies
The annual report launched by the Egyptian Exchange during its harvest for the year 2022 revealed many steps that will be implemented this year. Most notably, Egypt is preparing to list four state companies on the stock exchange as part of its planned IPO and privatization program.
The Egyptian government has adopted a vision to increase the private sector’s contribution to the national economy by making available state-owned assets worth $40 billion for partnership with the local or foreign private sector over the next four years. It also plans to list 10 public sector companies and two companies of the armed forces on the stock exchange. But the Russian-Ukrainian war had delayed this plan.
Egypt is currently experiencing a severe economic crisis crystallized by the deterioration of the pound and a significant shortage of foreign currency. Things deteriorated starting last March when the war began, followed by foreign investors rushing out of Egyptian capital markets with large sums estimated at about $20 billion.
Since then, currency reserves have been dwindling to critical levels, forcing the Egyptian government to look for other alternatives to provide hard currency and help pay off $28 billion in outstanding debt and interest and finance the current account deficit by the end of 2023. Among these alternatives is initiatives to benefit from remittances from Egyptians abroad, estimated at about $22 billion.
The International Monetary Fund (IMF) also recently agreed to lend Egypt $3 billion to be distributed over four years.
The bourse’s report, announced by its chairman Rami El Dokkani at a press conference, revealed that the companies that intend to be offered include Banque du Caire, Misr Life Insurance, Egyptian Drilling, and Elab, which is affiliated with the oil sector.
The report expects to offer stakes in eight companies under the government’s privatization program, which includes Enppi, Misr Insurance, Alexbank, Midor, ETHYDCO, Assiut Petroleum Refining, Egyptian Methanex for methanol, and El Wadi for phosphate and fertilizer industries.
Reducing the military’s involvement in the Egyptian economy is a challenge for Cairo, something the IMF clearly noted in its annual review of the Egyptian economy in June 2021, when it first called for all public companies, including those owned by the military, to be privatized.
El-Dokkany revealed during the conference that the government aims to list 23 state companies on the EGX, including 9 companies already listed in the coming period, with an expected total value of EGP 80 bln. The companies to be offered are operating in 7 economic sectors, and it is targeted to offer a 15-20 percent share.
The companies that have been listed and offered a part of their shares and are eligible to increase their shares in the market are: “Alexandria Mineral Oils”, “Housing and Development Bank”, “e-Finance” for Financial and Digital Investments, “Madinet Nasr for Housing and Development”, “Heliopolis for Housing and Development”, “Misr Aluminum”, “Sidi Kerir Petrochemicals-Sidpec”, “Abu Qir for Fertilizers and Chemical Industries”, and “Alexandria Container and Cargo Trading”.
The new offerings are expected to increase liquidity and market attractiveness to non-Egyptian investors, achieve greater market stability, and reduce price volatility.
The report explains that the external roadshow that began last October and included a meeting with 16 investors and investment funds, as well as 4 international institutions, showed that the exchange rate crises and the lack of offerings were at the top of the obstacles hindering investors’ entry into the Egyptian capital market.
In addition, the EGX announced that the capital increases witnessed during the past year amounted to EGP 30.2 billion, whether in the form of cash increases through IPOs or through free dividends to companies, compared to EGP 18.4 billion in 2021, an increase of 64%.
According to Al-Dokani, the number of new investors increased last year by 202%, as the number of new investors reached about 175,000 in 2022, compared to the entry of only 58,000 new investors in 2021, bringing the total number of market investors to 526,000.
The total number of companies listed on the EGX increased last year to 242, compared to 237 in 2021, in addition to the registration of treasury bonds worth EGP 331.5 billion.
El-Dokkani revealed that the EGX aims to make Egypt the main center for trading carbon certificates in the African continent, with the aim of helping companies reduce emissions, issue carbon certificates for projects directly, and create a regulated market that allows companies to buy and sell carbon credits related to the size of their emissions.
Finally, there is no doubt that the Egyptian government’s plan and the proposals to be implemented this year are very ambitious and contribute to lifting the economy out of the situation it is today. The most important challenge is the extent of interest that investors and sovereign funds will show as the attractiveness of the share prices of Egyptian companies grows after the exchange rate is liberalized.
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