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Wednesday, 24 October 2018

Has Egypt’s fall IPO season just come to an end?

** #1 The fall equity raising season is officially over. The state privatization program was not the only victim of the emerging markets selloff, according to Reuters’ Patrick Werr. At least three IPOs tentatively for the fourth quarter of this year have been postponed, according to an investment banker involved in one of the offerings. These include Rameda Pharma, Giza Spinning and Weaving and Hassan Allam Holdings, the source noted. “No IPOs this year. [They have been] all pushed to next year until we see how the market will recover,” he said. “I think everyone reached that decision.”

Will delaying the state privatization program adversely impact the budget deficit? The Madbouly government might have to adjust its budget deficit forecast for the FY 2018-19 now that it has delayed phase one of the state privatization program, says Werr. Egypt’s budget had projected that phase one of the program would see some EGP 10 bn flow into the treasury. The government was forced to postpone the program over the weekend amidst an emerging markets selloff and after Sarwa Capital’s shares fell 11% in their EGX debut last week. The state had been planning to sell 4.5% of its Eastern company this week as the first of as many as five companies that could have offered shares for sale this year.

Not necessarily. “The government still has time to resume share sales before the end of the fiscal year in June,” said Allen Sandeep, head of research at Naeem Brokerage. It could meet its revenue target from offerings in just two of the five originally planned for 2018, he added, pointing to Eastern Company and Abu Qir.

The delay was still right move: “If it were not postponed, and the Eastern offering had failed to be covered at proper valuation, this could have triggered a political backlash and possibly have jeopardized the whole program,” Hany Farahat, senior economist at CI Capital, told Reuters.

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