Lulu Retail Holdings, operator of one of the largest hypermarket chains in the Middle East, commenced its initial public offering (IPO) on Monday, with expectations from bankers that it could be the largest in the UAE this year.

The offering by the conglomerate, which operates over 240 stores across the six Gulf Cooperation Council (GCC) countries, comes amid a retail spending boom in the region, driving domestic listings in the sector.

The IPO is set to run from October 28 to November 5, offering more than 2.582 billion shares. Trading is expected to begin on the Abu Dhabi Securities Exchange on November 14, according to the IPO documentation. Two sources involved in the transaction indicated that the offering could raise between $1.7 billion and $1.8 billion for a 25% stake, although Lulu declined to comment on the deal's valuation.

Founded in 1974 by Indian businessman Yusuff Ali, Lulu follows the trend of grocery firms going public, joining the ranks of UAE-based Spinneys, which listed this year, and Saudi retailer BinDawood Holding, which went public in 2020.

The IPO document outlines Lulu's commitment to maintain a total dividend payout ratio of 75% of annual distributable profits after tax, with payouts scheduled twice a year, subject to relevant parameters. The company reported first-half revenue of $3.9 billion in 2023, reflecting a 5.6% increase compared to the previous year, while full-year revenue rose to $7.3 billion, also up 5.6%.

This annual revenue growth was primarily driven by sales from existing stores, the expansion of the store network, and an increase in online sales. Core earnings in the first half of 2024 reached $391 million, marking a 4.3% increase from the previous year, while annual core earnings for 2023 rose by 7.2% to $753 million.

Lulu Group is recognized as the largest full-line retailer in the GCC by selling space, sales volume, and store count. It is the second-largest grocery retailer in the UAE and the largest in Oman, Qatar, Bahrain, and Kuwait, while also being the fastest-growing pan-GCC retailer in Saudi Arabia. Currently, Lulu operates 240 stores, including 116 hypermarkets, 102 express stores, and 22 mini-markets, with a strong presence in the UAE, Saudi Arabia, and other markets.

As of December 31, 2023, the group's total selling space was approximately 1.3 million square meters, about three times larger than the average selling space of its listed peers in the GCC. Lulu serves over 600,000 daily shoppers, sourcing products from 85 countries and operating 21 distribution centers across the GCC to support its retail operations.

Yusuff Ali, founder and chairman of Lulu Retail, expressed pride in the company's achievements and growth over the past 50 years. He attributed the company's success to the vision and ambition of GCC nations and their strong leadership, which is fostering positive demographic and consumption trends. Ali welcomed new shareholders, emphasizing Lulu's commitment to retail excellence in the GCC.

The company plans to distribute dividends for the six months ending December 31 in the first half of 2025, and reported revenues of $7.27 billion (Dh26.7 billion) in 2023, up from $6.89 billion the previous year.