UM Al-Qura IPO: Everything You Need to Know About the Offering and Its Impact

The UM Al-Qura Development and Construction IPO is a public offering of part of the company's shares in the Saudi financial market (Tadawul), representing a model for entities established specifically to achieve the goals of Saudi Vision 2030 in developing the infrastructure of Mecca and the holy sites. Founded in 2012, the company focuses on pivotal projects such as King Abdulaziz Road and the Path Project, which aim to enhance services provided to pilgrims and Umrah performers. The IPO represents a strategic step that enables the company to raise new capital to support its expansion plans, reflecting the confidence of regulatory bodies and investors in the growth potential of the religious urban sector. This IPO is one of the largest offerings in the Saudi market for 2025 in terms of the number of shares offered and the coverage ratio, making it a focal point for both individual and institutional investors.

The number of shares offered in the UM Al-Qura IPO is 130.79 million shares, representing 9.09% of the company's capital post-offering. The final share price was set at 15 Saudi Riyals through a book-building process, a method that ensures pricing reflects institutional demand. The company allocated 10% of the offered shares (approximately 13.08 million shares) to individual subscribers, while the larger portion was allocated to investment institutions. This distribution serves as a model for major offerings aimed at diversifying the shareholder base and providing strong liquidity upon listing. Notably, the Saudi Capital Market Authority officially approved the offering on December 23, 2024, and the individual subscription period began on March 5, 2025, lasting until March 9, 2025.

The UM Al-Qura IPO witnessed exceptional coverage from investment institutions, with a coverage ratio of approximately 241 times the number of shares allocated to this segment, reflecting unprecedented interest from major investors. The individual segment was covered about 20 times, with total individual subscription requests amounting to approximately 3.93 billion Riyals. Due to the high demand, only 10 shares were allocated to each individual subscriber. These figures illustrate the level of confidence in the company and its future projects, as well as the positive outlook of the Saudi market towards the urban development sector in Mecca and the holy sites. They also indicate that IPOs with a governmental character or linked to Vision 2030 enjoy wide acceptance among investors.

After the conclusion of the IPO and the allocation of shares, the ownership structure of UM Al-Qura has become more diversified, with local and international institutional investors joining the list of shareholders alongside individuals. The company allocated 8.88 million shares (approximately 0.62% of the capital) to Takatif Holding Group as a major strategic investor, a leading national company active in the contracting and construction sector. This strategic inclusion of an industrial partner enhances the company's opportunities to execute its projects efficiently and provides the necessary technical and financial support. The remaining shares are distributed among individual subscribers and financial institutions, securing a broad capital base and supporting the stability of the stock upon listing.

UM Al-Qura's strategy aligns with the objectives of Saudi Vision 2030, which focuses on developing Mecca and the holy sites and increasing the capacity for pilgrims and Umrah performers. The company's initial public offering enhances the ability of the religious urban sector to attract local and foreign capital and represents an opportunity to engage the private sector in large-scale projects with significant social and economic impact. Through this IPO, the Saudi government reaffirms its commitment to stimulating investment in religious infrastructure and facilitating investor participation in national priority projects. The IPO also highlights the role of the capital market in financing the state's strategic plans and enhancing economic diversification.

UM Al-Qura is unique in its focus on projects in Mecca and the holy sites, but competition in the market comes from major real estate development companies like Dar Al-Arkan and various contracting firms and building material suppliers. While UM Al-Qura stands out with its religious projects, companies like Dar Al-Arkan and cement companies (including Hail Cement, symbol 3001) are involved in the supply chain and benefit from demand related to major projects. Competitors also include specialized engineering offices and major national contracting companies. Nevertheless, UM Al-Qura's partnerships with entities like Takatif Holding provide a competitive advantage that supports the execution of projects with high quality and efficiency.

The share price in the UM Al-Qura IPO was set at 15 Riyals, giving the company an estimated market value of approximately 21.6 billion Riyals after listing, based on the total number of shares (about 1.438 billion shares). Detailed data on the price-to-earnings (P/E) ratio or dividends prior to listing is not available, as the company was not previously listed, and it is expected to announce periodic financial data after the end of the fiscal year. Newly listed companies typically prefer to reinvest profits to accelerate growth, and the dividend policy is expected to depend later on the company's results and financing needs.

Individual investors were able to participate in the UM Al-Qura IPO through licensed Saudi banks and approved brokerage platforms at Tadawul. The subscription steps included ensuring an active trading account or a qualified bank account, then submitting a subscription request during the offering period through electronic channels or bank branches. After the subscription period ends, allocation results are announced, and the subscribed shares are deposited in investors' portfolios. Institutions participated earlier in the book-building process, according to the mechanism approved by the Capital Market Authority. The electronic subscription is characterized by the ease of participation procedures and the quick allocation of shares.

All IPO processes in the Saudi market are supervised by the Capital Market Authority, which ensures transparency and fairness in the offering and requires companies to publish a detailed prospectus that includes the offering objectives, financial structure, risks, and distribution policies. UM Al-Qura shares are listed on the main market (Tadawul), providing strong liquidity and modern electronic trading channels for investors. Major Saudi banks managed the IPO and provided secure electronic platforms. This tight regulation ensures the protection of investor rights and aligns with international best practices in initial public offerings.

Despite the strong demand for the UM Al-Qura IPO, investing in urban development projects involves several risks, the most prominent of which are execution risks (project delays or cost overruns), market risks (stock price volatility after listing), and regulatory risks (changes in government policies or licensing requirements). Additionally, the Hajj and Umrah sector is affected by economic and demographic variables. It is important for investors to recognize that initial public offerings are often accompanied by a high degree of volatility in financial and price performance, and it is always advisable to study the prospectus and consult specialists before making any investment decision.

The UM Al-Qura offering indirectly affects the supply chain and related sectors, especially building material companies like cement. For example, Hail Cement Company (3001), listed on Tadawul, is one of the key suppliers for construction projects in Mecca. The increase in urban projects in the area as a result of the UM Al-Qura IPO is expected to boost demand for cement and concrete products, positively impacting producing companies in the sector. For more about Hail Cement's performance and details, you can visit the stock page at (/stocks/3001/).

The listing of UM Al-Qura shares on the main market is expected in the second quarter of 2025 after completing all regulatory procedures. Trading typically begins at or near the offering price, but the stock's subsequent performance depends on the company's results and market developments. The high coverage of the IPO reflects positive sentiment, but the market is subject to various factors such as general economic conditions and government expansion policies. The company continues to disclose developments in its projects and plans post-listing to ensure transparency and build investor confidence.

UM Al-Qura has benefited from strategic partnerships with major entities such as Takatif Holding, along with support from the Saudi government by allocating major projects in Mecca to the company. This support enhances the company's ability to execute its large projects according to set timelines and contributes to the stability of its operations and opens new avenues for growth. These partnerships are key attractions for investors looking to participate in national priority infrastructure projects. The presence of strong local banks in managing the IPO process ensures the success of the offering and the smooth transition of shares to the secondary market.

UM Al-Qura has not yet announced a clear dividend policy, as the company is currently focused on investing the proceeds from the offering in executing major projects. Newly listed companies often adopt a cautious approach regarding dividends, preferring to reinvest profits to strengthen capital and expand. The company is expected to announce its first annual financial results after the end of 2025, which will reveal its ability to generate profits and determine its approach regarding future dividends. Investors are advised to follow the company's disclosures and periodic reports for any updates on financial policy.