With a paid-up capital of 79.7 million Kuwaiti dinars, National Investments Company (NIC) is among the top investment firms in Kuwait. It boasts a broad and varied shareholder base that includes some of Kuwait’s most illustrious institutions and high net worth individuals.
National Investments Company participates extremely effectively and actively in a variety of industries in the local, Arab, and international markets. The secret to National Investments Company’s success is its ongoing commitment to adding value for its clients by providing distinctive and varied investment alternatives, generating above-average returns, and offering excellent customer service.
National Investments Company’s key principles ensure that they give their clients, shareholders, and staff fantastic success stories by ensuring that they are committed to and dedicated to serving them.
International Finance caught up with NIC who shared their insights about IPOs, public markets, and much more.
Excerpts from the interview:
International Finance: Why has there been a recent increase in interest in IPO from family offices in Kuwait?
NIC: For various reasons, Kuwaiti family offices have begun to seriously consider IPOs. These can be divided into the institutionalisation of family offices and the growth of the capital markets.
On the capital markets front, the promotion of family offices’ listings by Kuwait’s Capital Markets Authority and MSCI’s designation of Kuwait as an Emerging Market have made public listings an alluring value proposition. To emphasise the advantages of the procedure, Boursa Kuwait has also actively engaged with family offices. Additionally, the local equity markets’ exemplary performance and improved liquidity positions gave family businesses more convenience in the valuation aspect.
Family offices, on the other hand, attempt to achieve sustainability and partial monetization as they transfer ownership to the second and third generations of the family. They aim to diversify their income streams by implementing international corporate governance best practises. Listing on the Boursa Kuwait enables addressing these challenges and advancing their development into institutionalised entities.
International Finance: Are we expecting a lot of companies to list soon?
NIC: A number of businesses have declared or are thought to be getting ready for an IPO soon. This year, there has been a respectable amount of activity on the capital markets. The 11x oversubscribed IPO of Ali Alghanim Sons Automotive was successfully led by NIC. The idea that an IPO might be used as a tool for institutionalisation and partial monetization was supported by this transaction in a concrete way. In light of this case study, other family-owned companies are anticipated to submit an IPO application soon. These include the Al Mutawa family’s automobile company, Alghanim Industries, and other family businesses. Prospective investors can choose from a wide range of sector exposures offered by these organisations, such as consumer discretionary, food and beverage, logistics, real estate, technology, etc. We expect at least three or four large IPOs in 2023, subject to market conditions.
International Finance: What would you advise companies seeking IPO?
NIC: We frequently get requests from businesses looking to list or depart via an IPO. An IPO is a fantastic option for some businesses, but it is not a “one size fits all” answer. At the outset of the process, NIC invests a lot of time with stakeholders to understand their business strategy and IPO rationale. We examine closely the sources of revenue, the company’s financial situation, investor sentiment, related party transactions, commercially sensitive information that would need to be disclosed to the public markets, and valuation expectations. We only advise filing for an IPO after gaining a comprehensive understanding of the business. Pre-structuring before such a deal can be crucial, and getting the right vehicle ready for an IPO might take months or even years. The time and resource commitment required for such a transaction, both prior to and following the IPO, must also be anticipated by stakeholders.
In some cases, a trade sale (merger or acquisition) or a private transaction would be a far superior choice. Due to their ability to extract synergies and open up fresh prospects, strategic investors are frequently ready to pay a premium. It always depends on the stakeholders’ goals and ambitions.
International Finance: What is the role of a global coordinator in making the IPO a success?
NIC: The right combination of elements is necessary for an IPO to succeed. Planning ahead and having a solid grasp of the market’s dynamics and investor emotions are necessary for this. From the beginning, we collaborate closely with important stakeholders to position the business for success. The company’s valuation is one of the crucial elements, but it is not the only one. For example, compared to other markets, Kuwaiti retail investors place a significantly greater emphasis on price per share.
Additionally, important criteria include raising investor awareness (e.g., through roadshows and analyst coverage) and reducing investor pain points (e.g., by shortening the period between funding and listing). We always make sure that a diverse group of investors has been taken into account in order to create an initial demand for the IPO and maintain a high level of liquidity after the listing. We completely redesigned Kuwait’s subscription procedure for the last IPO in order to comply with global best practises. For instance, in order to make it considerably simpler for investors to subscribe to an IPO, we established the ideas of demand forms and provisional allocations.
Furthermore, in order to make the subscription process more accessible for potential investors, we closely collaborated with the Kuwait Clearing Company to digitise it. We and the regulators collaborated extensively to shorten the period between subscription and listing, resulting in the quickest listing after the subscription closed. These are a few of the elements that made Ali Alghanim Sons Automotive’s listing successful and contributed to the company’s good post-listing performance.