x Abu Dhabi, UAEMonday 22 January 2018

UAE's Khalifa Fund halts IPO plan

The Khalifa Fund will no longer consider publicly listing its new venture capital operation

The Khalifa Fund's new venture capital operation, which intends to invest in small and medium-sized businesses, no longer has plans for an initial public offering (IPO) of shares.

Having considered an IPO listing last year for the Dh100 million (US$27.2m) venture capital operation, Ahmed al Mutawa, the Khalifa Fund's chief executive, said yesterday this was no longer an option.

"No one will want to get involved with a venture capital fund," he said. "There's just not the appetite [among investors]."

Full details on the venture capital fund are yet to be announced, but it is expected to invest in equity stakes of companies in Abu Dhabi, initially focusing on small and medium enterprises, and serving as an incubator for their development.

Ibrahim al Mansoori, the fund's deputy chief executive, had previously indicated that it could sell shares to the public to raise more capital.

"We are open for all types of exit options that could be exercised, including [an IPO]," Mr al Mansoori said in August. But this option has now been scrapped, with analysts citing continued uncertainty in the market as a possible cause.

"The general climate of IPOs in the UAE market is pretty quiet," said Julian Bruce, the director of equity sales at EFG-Hermes in Dubai. "I don't think the outlook is going to be better, but until we see some improvement, there is very little incentive for companies to come to the market, and investors aren't interested in IPOs at the moment."

Many analysts also said an IPO of a venture capital fund might be unsuitable for the nature of the fund's investments, which are usually for long periods.

Abu Dhabi's Department of Economic Development singled out venture capital and lease financing as alternatives to more traditional bank loans and credit lines, in a proposal put forth to bankers and central bank officials last year.

Mr al Mutawa, speaking yesterday at the second Abu Dhabi Innovation Forum, questioned whether the country had enough angel investors or venture capital funds.

"In terms of financial resources do we have really the vehicles that drive ideas to the market? Do the governments have good systems that are focused in funding innovations?" he said. The Khalifa Fund was launched three years ago to encourage Emirati entrepreneurship.

Having received 4,000 applications for entrepreneurial projects since its inception, the organisation has distributed about Dh400m to 233 projects in the capital. It launched the Tasneea scheme last year to stimulate manufacturing ideas.