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Clerics, credit, jingoism: Saudi Aramco casts IPO net

From taboo-busting religious support to easy credit and fervent jingoism, Saudi Arabia pulled out all the stops to prop up Aramco’s IPO but it is unlikely to be the blockbuster it once hoped for.

The world’s most profitable company is seeking to raise around $25-billion — a fraction of the $100-billion it once sought — from its much-delayed initial public offering that is heavily focused on domestic and Gulf investors.

The sale of 1.5% of the energy giant has so far been oversubscribed 1.7 times, it said last week after its retail tranche ended, with bidding for institutional investors set to close on Wednesday.

That however pales in comparison to Saudi Arabia’s other blockbuster listings, including the 2014 IPO of the National Commercial Bank, the kingdom’s biggest lender, which was oversubscribed more than 23 times.

In 2006, a record 10 million Saudis—roughly one in two of the population—subscribed to property developer Emaar’s IPO while Aramco attracted only about half as many retail investors.

“Preparations for the public listing of Aramco… have stepped up a gear but the signs are that it is unlikely to be the blockbuster sale that the kingdom once hoped for,” said Capital Economics.

The sale is on course to beat Chinese retail giant Alibaba’s $25-billion record IPO in 2014,  but “the proceeds would barely cover the kingdom’s budget deficit for a year”, the research group added.

Barring a last-minute surge from institutional investors, interest appears relatively muted despite a nationwide advertising blitz, banks offering easy “IPO loans” and nationalists calling for investment as a patriotic duty.

Aramco also dangled sweeteners for local investors, including promises of higher dividends and the possibility of bonus shares if they hold on to the stock.

Conflicting religious advice 

But in an ultra-conservative nation promoting what observers call a de-emphasis on religion amid Crown Prince Mohammed bin Salman’s sweeping modernisation drive, some Saudis say they are torn between conflicting religious advice.

Senior cleric Abdullah al-Mutlaq sought to drum up support for the IPO, saying it was “halal”, or permissible in Islam, and that even religious scholars were likely to participate.

But influential cleric Abdelaziz al-Fawzan, who campaigners say was arrested last year, claimed in a video that resurfaced recently on social media that part of the IPO was not compliant with Islamic principles.

“I want to subscribe (to the IPO) but… Fawzan says it’s usury and Mutlaq says it’s halal. We are lost between them,” said one Twitter user.

Some of Saudi Arabia’s wealthiest families have been pressed to take part.

That reportedly includes billionaire tycoon Prince Al-Waleed bin Talal who was among several businessmen locked in Riyadh’s Ritz-Carlton hotel during a 2017 crackdown on corruption.

“If I don’t invest people will say ‘I am not patriotic’,” a Riyadh-based businessman said.

‘So much hype’

“There’s so much hype: ‘Prince Al-Waleed is investing, Malaysian investors are investing, it’s very safe’ — but I cannot forget 2006,” he added, explaining his decision to steer clear.

The businessman said he lost around one million riyals ($267 000) in the kingdom’s worst stock market crash in 2006, much of which came through three bank loans that he is still repaying.

But a senior government figure dismissed such concerns.

“Aramco extracts oil from the ground for barely $3 a barrel,” he said.

“Even if crude prices stay low Aramco will remain highly profitable for a long time, generating wealth for its investors.”

International investors, however, have baulked at Aramco’s valuation of between $1.6-trillion and $1.7-trillion — a figure still well short of Prince Mohammed’s desired valuation of $2-trillion.

Aramco last week said that of the $31.7-billion in bids received so far from institutional investors, foreign investors accounted for just 10.5 percent.

Luring international funds for Prince Mohammed’s ambitious megaprojects and transformation plan for a post-oil era was once the centrepiece of the IPO, first proposed in 2016.

Malaysian state energy company Petronas, which was expected to invest, said in a statement that “after due consideration the company has decided not to participate in Aramco’s (IPO) exercise”.

However Gulf ally Abu Dhabi plans to pump as much as $1.5-billion, while the Kuwait Investment Authority is also considering an investment, Bloomberg News reported.

But amid tepid demand, Aramco executives have cancelled IPO roadshows in the United States and Europe.

“The Aramco IPO is shaping up to be an economic demonstration of the strengths and weaknesses of Saudi Arabia’s new reliance on nationalism,” said Kristin Diwan from the Arab Gulf States Institute in Washington.

“The population may be mobilised in support of national goals, but international support is weakened by its excesses.”

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Mundunur: A 1,000-Year-Old Italian Medieval Village and South Italy Confront 2020

Mundunur: A 1,000-Year-Old Italian Medieval Village and South Italy Confront 2020 – World News Report – EIN News

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Ujjivan Small Finance Bank IPO opens today. Should you subscribe to it?

will launch its initial public offer (IPO) today at a price band of Rs 36 to Rs 37 per share. The small finance bank has fixed the bid lot at 400 shares and equivalent multiples thereafter, and aims to garner approximately Rs 750 crore via the three-day issue (till December 4).

Nearly 20.27 crore shares will be offered for subscription, which will be distributed among QIB (75 per cent of the net issue; 60 per cent of QIB to Anchor Investors), non-institutional investors (15 per cent), and retail investors (10 per cent). The issue includes a reservation of Rs 75 crore worth of shares for subscription by eligible shareholders of who will get shares at a discount of Rs 2 per share.

Established in 2017, the Ujjivan Financial Services-controlled USFB offers small finance to underserved and unserved segments in India. At the end of September 2019, the bank had a net interest income of Rs 740.4 crore, with a net profit at Rs 187.1 crore. The Return on Equity (RoE) stood at 19.6 per cent, while Return on Asset (RoA) came in at 2.5 per cent.

Should you subscribe? Here’s what analysts say:


Analysts at the brokerage opine that the SFB has maintained its asset quality along with sustainable business growth. As of September 30, 2019, gross non-performing asset (GNPA) was at Rs 109 crore i.e. 0.85 per cent while net NPA ratio was at Rs 43 crore or 0.33 per cent. The portfolio at risk has reduced from Rs 304 crore in FY18 to Rs 211 crore in H1FY20 while the provision coverage ratio was at 71.9 per cent in FY19.

“USFB had a steady ride in terms of advances growth along with maintaining asset quality. There was continued focus on garnering retail liability along with building CASA base. We have a SUBSCRIBE recommendation on the stock. Further, at the IPO price band of | 36-37, the stock is available at a P/BV of ~2.2x (post issue) at the upper band on H1FY20 basis,” the IPO note said.


Analysts at the brokerage have given a ‘subscribe’ rating to the stock given the improving financials, good asset quality and healthy return ratios.

“The bank has a total gross loan book of nearly Rs 129 billion as on Q2FY20 with micro-financing forming 79.2 per cent of the total advances. The bank is deliberately planning to grow microfinance segment at 20-25 per cent vis-à-vis 30-35 per cent earlier, in order to de-risk its portfolio. It has also started focusing on the retail loan segment and thus built a decent Affordable Housing and MSE loans portfolio, constituting 9.4 per cent and 6.5 per cent of advances respectively. This has led to share of secured loans rise to 19.4 per cent in the portfolio but led to moderation in net interest margins (NIMs),” it said in its note.


The brokerage firm observes that during the recent inspection by the Reserve bank of India (RBI) for FY18, it made some key observations on the bank’s business and operations as enumerated below, of which some are basic in nature and some are reasonably serious like a lack of fraud management system, lack of appropriate rating methodology, among others.

“Although the bank claims to have taken corrective action, these lapses indicate that the new management will have to ramp up operational/compliance standards to the next level to avoid regulatory ire,” the IPO note said.

The brokerage values the bank at 1.5x Sep’21E ABV, while the IPO at the higher price band of Rs37 values the bank at a slight premium valuation of 1.7x Sep’21E ABV.

“At the IPO price, USFB’s valuation will imply a discount of 27 per cent for Ujjivan Holdco. We already have coverage on the Ujjivan Fin (Holdco) with a Sell rating/UW stance in EAP and a TP of Rs250 given our concerns around its weak liability profile/asset diversification, and that the bank is still exposed to managerial/business transitional risks” it added.


According to the brokerage firm, the small finance bank enjoys pan-India presence and has “deep understanding of its audience” which gives it edge over its peers in the industry.

“Its diversified operations also allow to de-risk its business by mitigating political and state-specific risks… Its operations are well-diversified and in fiscal 2019, no single state constituted more than 18 per cent of its overall loan portfolio. As a result, it has been able to reduce its concentration risk and diversify its loan portfolio… The bank offers its customers differentiated and customized products that include micro loans, agriculture and allied loans, MSE loans, financial institutions group loans, personal loans, housing finance and vehicle finance,” it wrote in its IPO note.


The brokerage has a ‘subscribe’ rating to the stock on the back of healthy financial position.

“Within 3 years of operation, USFB has been able to improve funding mix towards deposit and CASA ratio of 12 per cent. In FY2017, out of total borrowing, only 3 per cent was sourced through term deposit and reached to 76 per cent in Q2FY20. Bank has been maintaining one of the highest provision coverage ratios (67 per cent), which is a positive,” it says.

The brokerage, however, points out at risks emanating from any natural, social, political or regulatory disruption.


The analysts at Geojit bank of the SFB’s experience as an erstwhile microfinance institution, coupled with the ability to address mass market customers, which will further aid USFB to be among the leading SFBs in India.

“At the upper price band of Rs 37, USFB is available at P/BV of 2.5x FY19, which is at a significant discount to its peers and we have a ‘SUBSCRIBE’ rating with a long-term perspective,” it said.

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Chengdu Gas Group Aims To Raise Up To 928.9 Mln Yuan In Shanghai IPO



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Week In Review: Pharmaron, A Beijing CRO, Stages $434 Million Hong Kong IPO

Deals and Financings

Pharmaron Beijing [SHZ:300759] [HK:3759] staged a $434 million Hong Kong IPO to expand its international CRO operations (see story). In January, Pharmaron completed a $76 million IPO on the Shenzhen Exchange, and its stock price has quadrupled since its debut. The company said the dual registration will support its growth plans, including developing its global integrated service platform, R&D capability, M&A and strategic investments. Founded in 2004, with facilities in China, the US and UK staffed by over 7,000 employees, Pharmaron offers R&D services to partners in North America, Europe, Japan and China.

Genetron, a Beijing-North Carolina genomics company, closed a $71 million Series D Round to develop cancer molecular diagnostics products and services. The company’s offerings include risk assessment, early screening, molecular pathology diagnosis, medication guidance and prognosis monitoring. Its products address the needs of cancer patients and high-risk groups as well as people who show no signs of disease. The company also works with biopharmas to discover biomarkers for precision medicine drugs. The funding was led by Vivo Capital, CICC Healthcare Investment Fund and Alexandria Venture Investments.

Sichuan Clover Biopharma completed a $43 million Series B round to support its biologic drug operations (see story). One week ago, Clover announced it had started a fifth trial of its lead drug, a TRAIL-Trimer fusion protein being tested for three indications in China and Australia. Clover intends to use the proceeds to develop biological candidates, operate its commercial-scale cGMP biomanufacturing facility and expand its R&D pipeline using the company’s proprietary Trimer-Tag© technology platform. The financing brings Clover’s total capital raised since 2016 to over $100 million.

Shanghai Ennovabio Pharma, a novel drug startup, closed a $14 Series A financing led by Matrix Partners China and joined by existing shareholder Highlight Capital. Established in 2016 in Shanghai’s Zhangjiang Park, Ennovabio uses bioinformatics to develop Class 1.1 novel drugs. The company expects to file INDs in China and the US next year for its lead candidate, a treatment for diabetic eye disease. Ennovabio, which plans to combine internal research with in-licensed candidates to build its pipeline, has six novel drugs in preclinical development.

GensKey, a Beijing diagnostics company, raised $14 million in a B round to expand its pathogen diagnosis services in China. Founded in 2017, GensKey uses next-gen sequencing technology to diagnose pathogens. Its lead product, GenseqPM, claims the ability to identify any pathogenic micro-organisms with a high rate of detection that is highly accurate and speedy. The company, a product of Peking University’s incubator program, is headquartered in Changping Life Science Park in Zhongguancun, Beijing. The financing included SB China Capital, Shanghai Lin Chong Investment Management and Yuanju Capital.

Trials and Approvals

Merck/MSD (NYSE:MRK) announced Keytruda, its anti-PD-1 therapy, has been approved by China’s NMPA as a first-line treatment for patients with metastatic squamous non-small cell lung cancer (NSCLC) in combination with carboplatin and paclitaxel (see story). It is the third China approval of Keytruda as a first-line NSCLC therapy in one year. Previously, Keytruda was approved in China with chemotherapy as a first-line treatment of squamous and nonsquamous NSCLC, as well as a monotherapy for NSCLC patients with PD-1 positive tumors. The latest approval was based on improvement in overall survival among China patients.

China Ophthalmology Focus Limited (COPFL) [HK:0950] of Guangzhou completed enrollment of its large Phase III trial of an Adapalene-Clindamycin Combination Gel in China in patients with severe acne vulgaris. COPFL is a non-wholly owned subsidiary of Lee’s Pharm that raised $50 million in a Series A round earlier this year. Through its subsidiary, Zhaoke, COFPL owns a development and production facility in Guangzhou that is developing a portfolio over 21 ophthalmology proprietary products and difficult-to-manufacture generics for China and ASEAN markets. The facility is compliant with all international standards.

Suzhou Innovent Biologics [HK:01801] started the first clinical trial of a bispecific cancer treatment that targets PD-1 and HER2. Innovent developed the bispecific, IBI315, with Beijing Hanmi Pharma, a subsidiary of Korea’s Hanmi, using Hanmi’s PentambodyTM bispecific platform. Although IBI315 includes a PD-1 immunotherapy, Innovent does not identify it as Tyvyt®, the company’s China-approved PD-1. According to Innovent, IBI315 blocks the PD-1/PD-L1 signaling pathway, the HER2 signaling pathway, and it is also thought to bridge PD-1-expressing T cells to HER2-expressing tumor cells.

Hutchison China MediTech (Chi-Med) (NASDAQ:HCM) [AIM:HCM] reported the US FDA has granted Orphan Drug designation to the company’s surufatinib as a treatment for pancreatic neuroendocrine tumors (NET) (see story). Two weeks ago, China’s NMPA accepted Chi-Med’s surufatinib NDA for review to treat advanced non-pancreatic NET. Surufatinib, the second novel Chi-Med oncology drug to complete a China Phase III trial, is being tested in multiple solid tumors in China and the US, both as a monotherapy and in combination with immunotherapies. With US orphan drug status, surufatinib will be entitled to seven years of market exclusivity.

Disclosure: None

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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Aramco IPO draws bids of $44.3 billion as global investors steer clear Saudi oil giant’s share sale which closes Dec.4

Saudi Aramco’s share sale has attracted bids worth $44.3 billion as of Friday, about 1.7 times the amount the kingdom’s government plans to raise in what is on course to be the world’s largest listing when it formally prices next week.

Subscriptions to the sale are overwhelmingly from Saudi investors and others in the region, according to the banks arranging the initial public offering, indicating a lukewarm response from international institutions that have balked at the energy giant’s valuation of $1.6 to $1.7 trillion set by the Saudi government.

The kingdom is seeking to sell 1.5% of the state-controlled company, known officially as Saudi Arabian Oil Co., and with most of the bids at the top end of the valuation the government is likely to raise $25.6 billion. That would beat out Alibaba Group Holding Ltd.’s 2014 IPO, which raised $25 billion.

The sale is a key element of Crown Prince Mohammed bin Salman’s program to open up his country to foreign investors and diversify its oil-dependent economy. The IPO is the culmination of the crown prince’s years long effort to sell part of Aramco after first raising the possibility of a listing in 2016. Prince Mohammed has accelerated the much-delayed listing this year, installing loyal officials who backed the share sale and marginalizing those who opposed it.

The prince had hoped to raise up to $100 billion to help fund the economic transformation he has promised the Saudi people but Saudi officials scaled back the size of the offering in recent weeks, in part because of tepid demand from global buyers.

The country’s sovereign-wealth fund is set to receive the IPO proceeds to invest in non-oil industries that can create jobs for the country’s growing population. The lesser windfall, however, could limit the economic impact of the listing.

In total, the Saudi government plans to sell 0.5% of Aramco to individual investors and the remainder to domestic institutions and international firms registered in the kingdom, known as qualified foreign investors.

The window for retail investors to apply for the listing closed Thursday, and a total 4.9 million people—out of a population of 34 million—applied for shares with a total value of $12.6 billion, according the offering’s lead managers.

Institutional investors so far have made subscriptions worth $31.7 billion and have until Dec. 4 to submit bids. Aramco will then formally set the valuation, with the start of trading on the domestic Tadawul stock exchange expected around Dec. 11.

Of the institutional bids, 10.5% or roughly $3.3 billion has come so far from non-Saudis, according to the lead managers. The United Arab Emirates, a key Saudi ally, is likely to invest at least $1.5 billion through its government investment vehicles, and Kuwait is expected to invest about $1 billion, according to people familiar with the process.

Global investors from the U.S. and Europe, however, have grown increasingly skeptical about the listing after the company decided to drop a plan to also list on an international exchange, said a person close to the process. That decision signaled to some investors an unwillingness to open the company up to full scrutiny, the person said.

Aramco earlier this month canceled plans to market the IPO to investors in the U.S., Japan and Europe. The prince’s previous target valuation was $2 trillion, but that was lowered when many potential foreign investors turned away. Even $1.6 trillion to $1.7 trillion appears to be too high for many international institutions, some of whom have valued the firm at less than $1.5 trillion.

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Saudi Aramco’s IPO Oversubscribed, Reels In $44 Billion –

Saudi Arabia’s oil giant Aramco has attracted total bids of US$44.3 billion for its initial public offering—or 1.7 times the money the Kingdom hopes to raise with the world’s largest listing ever.

According to one of the IPO’s lead managers, Samba Capital, quoted by Bloomberg, the IPO has attracted a total of 166 billion Saudi riyals as of Friday, after the subscription period for retail investors ended on Thursday, and less than a week before the end of the subscription period for institutional investors.

Saudi Arabia will be offering up to 0.5 percent in Aramco to retail investors, while in total the Kingdom plans to list 1.5 percent of the company on the Saudi stock exchange, the Tadawul.

Aramco has set an indicative price range of 30-32 Saudi riyals, (US$8-8.52), per share, in its long-awaited initial public offering, which would give the company a total value of some US$1.7 trillion. Saudi Arabia aims to raise more than US$25 billion from selling 1.5 percent in its crown jewel.

Over the past week, Aramco’s IPO has drawn more bids than in the period to November 21, when the orders were nearly US$20 billion.

The Kingdom has doubled the leverage limits for loans that banks will extend to domestic retail investors who want to buy shares, looking to ensure that more retail customers will buy shares.  

The retail portion of the IPO has already been oversubscribed, Samba Capital said on Thursday, when the retail subscription period expired.

The institutional subscription periods ends on December 4, and Aramco will announce the final offer price of the IPO on December 5. 

Seeing that foreign institutional investors are not rushing to buy shares, Saudi Arabia is said to be tapping friendly governments in the Persian Gulf region to ensure the success of the IPO. Kuwait and Abu Dhabi may invest US$1 billion and US$1.5 billion in Aramco’s offering, respectively.

By Tsvetana Paraskova for

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Strong fundamentals make Ujjivan Bank IPO a good bet

ET Intelligence Group: Ujjivan Small Finance Bank (USFB) plans to raise Rs 750 crore through an initial public offering (IPO) of fresh equity shares to augment its tier I capital. Apart from having a strong presence in the country’s microfinance sector, the bank has started focusing on the retail loan segment. Given its high asset quality, diversified loan book across regions, strong management team, and reasonable valuation, investors may consider the IPO.

After receiving the small finance bank licence from the RBI in 2015, USFB commenced operations in February 2017. With 552 banking offices, 441 ATMs, 16,776 employees, it caters to 49 lakh customers across 24 states and union territories. Of the total loan book of Rs 12,864 crore as of September 2019, 79 per cent belonged to micro banking or small-ticket loans typically given to microfinance borrowers. The proportion has reduced from 97.5 per cent in March 2017 due to rising business from other segments including affordable housing and micro and small enterprises.

The bank has been consciously growing the micro banking segment at a moderate annual rate of 23 per cent between FY17 and FY19 compared with 40-45 per cent growth for some of the other microfinance companies. The strategy is helping to curb exposure to risky assets. To diversify the loan book further, it has recently started financing two- and threewheeler purchases.

Metros and urban areas constitute two-thirds of the bank’s advances while 20 per cent is distributed in semi-urban areas. This leaves the bank’s exposure to rural areas to just over 5 per cent thereby shielding it from vagaries of monsoon and bouts of loan waivers.

The loan book has doubled between March 2017 and September 2019 while deposits improved to Rs 10,130 crore from Rs 210 crore during the period. The share of current and savings account (CASA) deposits, which are a low cost funding option, improved to 11.9 per cent from 1.6 per cent by similar comparison. The gross non-performing assets (GNPA) were 0.9 per cent of the advances in September 2019. Total income was Rs 1,430 crore and net profit was Rs 187 crore in the six months to September 2019.

USFB’s cost-income ratio at 67 per cent is higher than 56.6 per cent for the larger peer AU Small Finance Bank (AUSFB). As USFB’s CASA share improves and the recent investments in new territories and new loan segments become profitable, the management expects the ratio to reduce.

The IPO is valued at a price-book (P/B) multiple of 2.5 considering the issue proceeds and Rs 250 crore of equity that USFB raised two weeks ago. This compares with AUSFB’s P/B of around seven. USFB has managed asset quality better with higher provisioning and it also has higher return ratios. This makes the IPO suitable for long-term investors seeking exposure to the small banking segment.

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Alpine Income Property Trust, Inc. Announces Closing of Initial Public Offering

Alpine Income Property Trust, Inc. Announces Closing of Initial Public Offering – World News Report – EIN News

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SBI Cards files papers for ₹9,600 crore IPO

SBI Cards and Payment Services Ltd., the credit card joint venture of State Bank of India, has filed a draft red herring prospectus with market regulator SEBI for an initial public offer (IPO) of ₹9,600 crore.

Most of the shares on offer for sale will come from SBI, which has 74% stake in SBI Cards, and CA Rover Holdings, which has 26%.

There will be fresh issue of shares of around ₹500 crore and offer for sale of 130 million shares. According to the offer document, SBI and CA Rover will offer 37.3 million, or 4%, and 93.2 million, or 10% shares, through the IPO.

Up to 1,864,669 shares have been reserved for employees and 13,052,680 for SBI shareholders. SBI Cards is the second-largest credit card issuer in the country after HDFC Bank with 9.5 million cards. It will be the second company among SBI’s arms to go public, after SBI Life Insurance Company.

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