Banque du Caire lands on EGX, the treasury to take up to half the proceeds

The treasury will take up to half of the EGP 36.37 bn (c. USD 658 mn) raised in Banque du Caire’s (BdC) IPO and put it toward easing public debt pressures, a senior government official tells EnterpriseAM. That’s as much as c. EGP 18.2 bn (c. USD 329 mn). The proceeds from the offering will first go to Banque Misr, the owner of BdC, and then the Ministry of Finance will handle the settlement, according to the official. The state-backed lender closed up 0.19% on debut yesterday, following a blockbuster IPO that drew strong demand from foreign institutional and retail investors despite an ongoing regional war and a weeks-long EGX selloff.

The 50% share isn’t limited to BdC: The Cabinet has approved giving the Finance Ministry half the proceeds from the state’s offerings more broadly, the government official tells us. The ministry sees the program as a way to bring down the budget sector’s debt ratios without taking on more interest costs while relying less on traditional borrowing to close its financing gap.

REFRESHER- Banque Misr sold 6.86 bn shares, or 45% of BdC, for EGP 36.37 bn (c. USD 658 mn), in what was the largest IPO the EGX has seen in at least a decade and the state’s first privatization by IPO in two years. Four foreign funds committed USD 256 mn before the books opened, and the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) came in later. Institutional orders reached c. EGP 205.8 bn, covering the private placement 5.95x, or 19.79x excluding cornerstone investors. The retail tranche was 27x covered.

The offering is the second-largest privatization by IPO in Egypt’s history, joint global coordinator EFG Hermes said in a statement (pdf) yesterday. Co-Head of Investment Banking Maged El Ayouti called it a sign of “the resurgence of foreign institutional appetite for tier-one Egyptian assets.” EFG says it has more IPOs lined up for before year-end and early 2027.

IN CONTEXT- The government is heading into the final review before the IMF program expires on 15 December, as we noted in yesterday’s special issue. State asset sales are among the program’s requirements, and the government said in March it planned to list or sell stakes in at least 20 state-owned companies, targeting USD 3-4 bn in proceeds before year-end.

A busy debut, a flat close

The lender gave up an early rally to close up just 0.19% at EGP 5.31 a share, according to the EGX’s daily report (pdf). The stock reached EGP 5.68 in the opening minutes and dipped as low as EGP 5.25, below the EGP 5.30 offer price, before the close. The close values the bank at EGP 80.98 bn (c. USD 1.5 bn), against EGP 80.83 bn at the offer price. That makes BdC about 2.1% of the EGX’s total market cap, Financial Regulatory Authority (FRA) Chairman Islam Azzam told reporters on the sidelines of the opening.

BdC’s first day of trading trailed this year’s other EGX debuts. MNT-Halan’s Egypt arm closed up 6.9% at EGP 26.20 on its 20 October debut. Gourmet hit the 40% first-day limit in February, and Korra Energi closed up 19.5% in June.

BdC was the EGX’s most-traded stock, with some 373.1 mn shares worth EGP 2.02 bn changing hands across 30.1k trades, or 21.2% of main-market turnover. That’s 4.1x the c. EGP 488 mn worth of CIB shares that traded on an average day over the past six months, as we noted in yesterday’s special issue, and 1.6x the EGP 1.26 bn MNT-Halan saw on its debut. Debut sessions usually draw heavy trading, so the question for funds is whether BdC keeps enough volume in the weeks ahead for them to buy and sell meaningful positions without moving the price. IN CONTEXT- The IPO debuted into a tough market, with the EGX30 closing down 0.70% yesterday to 48.4k points after dipping to 47.79k intraday, while the broader EGX70 and EGX100 each lost more than 2.2%, EGX data shows. The benchmark shed some 8.4% over the three sessions to 26 October (while BdC’s institutional book was open), including a 3.56% drop on Sunday, 25 October, as fund managers sold holdings to unlock liquidity for BdC and the offerings behind it. Yesterday’s close leaves the index up c. 15.7% YTD, down from 18.6% at Thursday’s close.

Priced for little upside

Pricing at full fair value left little room for a first-day pop, Okaz Asset Management Managing Director Randa Hamed tells EnterpriseAM. Banque Misr sold at the top of its range, which was capped at the fair value set by independent advisor Baker Tilly. “There was no discount to give investors a reason to buy more after listing,” she says. “Trading around the offer price is the natural result.”

At around 5x earnings, BdC is priced almost in line with CIB and the rest of the sector, Hamed says. On book value it’s cheaper, at about 1.2x against a sector average of about 1.4x, a valuation gap she says is justified by its lower profitability. “Investors will need earnings growth to make money from here,” she says.

Liquidity calls the shots

Short-term traders may have cashed out early, Hamed argues. With the market volatile and geopolitical tensions high, “traders are in control right now, and many will take even a 5% gain in a single day and exit,” she says. Retail investors hold just 2.25% of the bank, so the selling was “more about sentiment than volume.” Across the market, foreigners were net sellers of EGP 138.2 mn of listed stocks excluding deals, while regional and local investors were net buyers, EGX data shows.

Investors may be trimming other banks to make room for BdC. CIB closed up 2.88% yesterday, while Abu Dhabi Islamic Bank Egypt fell 3.44% and Crédit Agricole Egypt 2.96%. Hamed says the split was surprising, since banks should benefit to some extent from last week’s rate hike. It suggests investors are concentrating on CIB, the most liquid name, and possibly rotating out of other banks to make space for BdC, she says. “Valuation alone isn’t driving prices right now. Liquidity and positioning are.”

The rate hike makes the case for equities harder. “Investors have little incentive to take equity risk when T-bills yield over 20%,” Hamed says. Sustained foreign buying would need rate cuts, she says. Before then, what could support the price is quarterly results that start closing BdC’s profitability gap with its peers, and inclusion in the EGX30, which would bring in index-tracking demand.

The price floor matters in the meantime: Retail allottees can sell their shares back to CI Capital at EGP 5.30 until 1 December, as we noted. The stock closed a piaster above that level after trading below it during the session. “The real test comes after the stabilization window closes,” Hamed says.

A lesson for the next IPO

Hamed suggests future state asset sales require a valuation haircut. “Pricing at full fair value leaves nothing for aftermarket performance,” she explains. For the next stakes, “a meaningful [markdown] to fair value would buy stronger trading and a better reputation for the whole state program.” She also wants offerings spaced out given the uncertainty in global markets.

The state still holds 55% of BdC to sell, and CEO Hussein Abaza has described the IPO as the first step in a CIB-style sell-down. “The market will establish how good or bad the bank is,” he told us on our Making It podcast.

IN THE PIPELINE- Misr Life Ins. is due to start trading in late November or early December, and El Nasr Glass and Spring & Transport Needs Manufacturing (Yayat) in December, Hashem El Sayed, head of the Cabinet’s state-owned companies unit, said last week.

The anchors are in for the long run: The EBRD and IFC’s USD 100 mn tickets each buy them roughly 7% of BdC, the two said in separate statements (here and here) yesterday. The EBRD will also give BdC technical help on digital transformation, cybersecurity, and environmental and social risk management. The IFC said its investment should help BdC more than double the number of customers it finances to 1.9 mn by 2030 from about 899k and lift its lending to USD 8.9 bn from around USD 5 bn.

ADVISORS- CI Capital is lead global coordinator and joint bookrunner. EFG Hermes is joint global coordinator and joint bookrunner. Enterprise Advisory is investor relations advisor to Banque du Caire.