Dubai road-toll operator Salik sells 20% of the company via an initial public offering

Dubai is selling a 20% stake in its toll collection system, which will net the government about $1 billion as the city ramps up trade.

The emirate plans to sell 1.5 billion shares of Salik, according to a statement released on Monday. The offering starts on 13 September and the listing on the Dubai Stock Exchange is expected on 29 September.

Traders and investors will watch Salik’s IPO after the Gulf summer saw record listing revenue in the first half of the year. But higher oil prices and capital inflows, which have supported regional markets, have since come under pressure from recession worries.

“We are fully aware of the economic conditions, we are fully aware of inflation and so on,” Chief Executive Officer Ibrahim Al Haddad said. “We are totally confident this will be very good news when we announce the price range and it will be received positively by the investment community.”

The agreement is part of global plans to list 10 state-owned companies to boost trade and catch up with Abu Dhabi and Saudi Arabia. Earlier, there was only one small IPO in Dubai in 2017, and a series of delistings has had a negative impact on the influx of investors.

Previously, the first two privatizations produced conflicting results. The Dubai Electricity and Water Authority have given up most of the initial profits from its market entry, while business park operator Tecom Group is trading 10% below its offer price. At the same time, Emirates Central Cooling Systems has completed banking assignments for its upcoming IPO.

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Despite this, the Dubai benchmark index held up pretty well against the background of the global sell-off. Dubai’s overall financial market index is up 4.8% this year, compared to a 22% drop in the MSCI Emerging Markets Index.

Salik is an automated system introduced in 2007 that, when a vehicle passes through one of the city’s eight toll booths, AED 4 is deducted from a prepaid account, eliminating the need for cash or toll booths. The firm is a significant asset, with around 60% of passengers in Dubai using private cars, and net toll traffic grew at a compound annual growth rate of 5.5% between 2013 and 2019.

Dubai last year unveiled a massive urban plan that says the population will grow by 76% over the next two decades, with Salik as one of the main beneficiaries. Other programs could boost revenue, including moving to dynamic pricing at toll booths to reduce congestion.

Also, Salik said that he may offer consulting services to other major cities wishing to implement similar fare systems and that the company may consider monetizing the data it collects in the course of its work.

The firm plans to pay dividends twice, in April and October of each financial year, and Salik CEO Al Haddad said the company will offer attractive payouts.