ABU DHABI: The initial public offering (IPO) of Lulu Retail Holding is set to begin at 8 AM (Indian time 9.30 AM) on Monday (October 28), offering a 25 per cent shares held by Lulu International Holdings Ltd.
After analysing the available financials (balance sheet and profit & Loss accounts), and the management discussions, businessbenchmark.news would like to share its thoughts with the prospective investors in the issue.
Price band
In the meantime, a statement from the company said the price range for the book building has been fixed between AED1.94 and AED2.08 per share. The issue price will be discovered through the book building process and the cut off price will be known only once the subscription period comes to an end on November 5.
Since December 31, 2023 (end FY23), the balance sheet of Lulu Retail Holding (Lulu Retail) has reduced by 33.85 per cent from $8.004 billion to $5.294 billion as of June end, 2024 (H1).
This has been made possible through the substantial downsizing of the related party transactions.
A close look at the balance sheet reveals that between December end, 2023 and June end, 2024, the ‘Due From Related Parties’ has significantly dropped from $2.42 billion to just $3.3 million on the Asset side..
Whereas, on the Liability side, the ‘Due To Related Parties’ decreased from $2.33 billion to $81.45 million, during the same period. “This has helped the company uphold the corporate governance and transparency,” a Thrissur-based chartered accountant (CA) told businessbenchmark.news.
Equity & Borrowings
The borrowings of the company have reduced considerably from $1.129 billion to $853.05 million (AED3.13 billion) during the same period. Aside from the reduction in the size of the balance sheet, the net worth or equity of the company, has improved during the past six months.
The total equity, which consists of $144.61million share capital, has grown by about 18 per cent, from $766.91 million to $904.02 million as of June end, 2024. (The financial year of corporates in the GCC is the calendar year, January to December).
Net profit
The Lulu Retail profit & loss account made available up to the quarter ending June 2024 certainly sheds light on the performance of the company. The company has earned a net profit of $56.25 million for the quarter ending June 2024 compared with $29.50 million for the same period in the earlier year.
For the first half ending June 30, 2024 (H1) of the current financial year, the company’s net profit was $149.33 million against $64.10 million in the earlier period. This shows that the performance of the company in the immediately concluded quarter and half year (H1) has been better than the same periods in the recent times.
However, the future net profit will require to consider the 9 per cent corporate tax that has started kicking in from June.
Dividend estimate
Businessbenchmark.news, as part of a numerical exercise, ventured into the calculation of a possible dividend payout based on the management view expressed in the prospectus. Management has shared that it would endeavour to distribute 75 per cent of the distributable profit as dividend to the shareholders of the company.
“Subject to applicable financial parameters, internal and external circumstances, and as per applicable legal provisions, the company endeavours to maintain a total dividend pay-out ratio of 75 per cent of annual distributable profits, after tax paid semi-annually, following the approval and publication of the results for the respective periods,” the management stated.
It also said the Group targets that a dividend for the six months ended December 31,2024, will be paid in the first half of 2025. In such a scenario, a rough prediction is possible on the imminent dividend for the six months ended December 31, 2024.
If the company is able to retain the same momentum in profitability, the half year ending December 31, 2024 will close with a net profit of approximately $150 million (AED550.5 million), and if the maximum of 75 per cent is distributed among the shareholders as dividend, the dividend payout would amount to approximately AED413 million against 10,328 million shares. (2058 million shares constitute 25 per cent shares on offer)
This could work out an approximate half yearly dividend distribution of AED0.04 or 4 fils apiece.
