Image used for illustrative purpose. Photo: File

Talabat shares closed 6.87% lower on their debut at the Dubai Financial Market on Tuesday, reversing an initial surge of over 7% shortly after listing. The food delivery company's shares dropped by Dh0.11 to Dh1.49 per share, down from the opening price of Dh1.70 on the first trading day. Despite an early 7.5% rise, the stock ended the session in the red.

A total of 737.482 million shares were traded, amounting to Dh1.188 billion in value across 18,519 transactions. Talabat was the most actively traded stock of the day. Meanwhile, the Dubai Financial Market index closed 1.11% lower at 4,794.11 points.

Talabat was the final major company to go public in a series of initial public offerings (IPOs) that dominated the UAE markets this year. Last month, the company sold 4,657,648,125 shares, representing 20% of its total issued share capital, raising $2 billion. The offering size was expanded during the book-building phase to meet strong demand from international, regional, and local investors.

Based on the final offer price, Talabat's market capitalization at listing stood at Dh37.3 billion ($10.1 billion). Redseer Strategy Consultants noted that Talabat serves over 6 million monthly active customers across eight countries, catering to a population of over 71 million.

"Talabat has been a cornerstone of the Mena region's tech ecosystem, and its IPO marks a significant milestone in the region's technological advancement," Redseer stated. Vijay Valecha, Chief Investment Officer at Century Financial, observed that Talabat's IPO attracted robust demand initially but closed more cautiously.

"Priced between Dh1.50 and Dh1.60 per share, the offering valued the company at $10.2 billion at the upper end. The stock opened at Dh1.70, reflecting a 6.25% increase from the offer price, indicating strong investor interest. However, it quickly declined to Dh1.43 and closed at Dh1.49. While IPOs of state-backed companies in the UAE have traditionally seen strong first-day gains, recent private company debuts like Lulu, Al Ansari, and Spinneys have shown more subdued movements, likely prompting profit-taking among investors," Valecha explained.

Despite the initial volatility, Valecha emphasized that Talabat's fundamentals remain robust. "For 2023, the company reported revenue of Dh6.16 billion, a 21% increase from the previous year, and a net profit of Dh1.08 billion, up 40%. At the top of the price range, the company's price-to-sales multiple is 6.04, and its P/E ratio is 34.5 based on 2023 earnings. Additionally, its net profit margin of 17.53% is significantly higher than the single-digit margins of its regional peers, suggesting strong positioning for sustained growth. Given its market leadership, strong performance, and growth potential, its valuation appears reasonable despite the early stock fluctuations," Valecha concluded.

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