Airtel Money IPO is massive boost for UK stock market

The launch of an initial public offering (IPO) on a scale last seen in 2021 today built on a £350 million fundraising by Softcat (LSE:SCT) to show London capital markets are open for business.

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The proposed listing of Airtel Money, which is 77% owned by FTSE 100-listed Airtel Africa  Ordinary Shares (LSE:AAF), is reportedly set to value the fintech company at £6 billion or more

That would be the most since the £8 billion of money transfer firm Wise in 2021, when a total of 37 tech and consumer internet companies raised £6.6 billion by going public.

The others included Trustpilot Group (LSE:TRST), Deliveroo, Moonpig Group  Ordinary Shares (LSE:MOON) and Auction Technology Group (LSE:ATG) as 126 firms made £16.9 billion through IPOs that year - the highest amount of IPO capital raised since 2007.

Setbacks for many of these newcomers and economic uncertainty have been factors in the slow pace of new listings since then, meaning the UK recently fell out of the top 20 for IPOs.

At a time of heightened merger and acquisition activity, there were just 11 IPOs of more than £100 million with a total value of £6 billion between the start of 2023 and first half of this year.

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One of the biggest was Raspberry Pi Holdings (LSE:RPI) in June 2024, when demand for the offer via interactive investor and other intermediaries far outstripped supply. The shares were priced at 280p and have since rallied to 621p prior to the release of tomorrow's interim results.

About 100,000 investors in the UK also swept up Space Exploration Technologies Corp Class A (NASDAQ:SPCX) shares worth a total of £271 million when Elon Musk's firm staged its record-breaking IPO at a starting price of $135.

Airtel Money confirmed today that its IPO will be made available to retail investors. Further details will be disclosed in its prospectus, which will be published early next month ahead of the final offer pricing announcement in mid-October.

Retail investors were also able to participate in last week's fundraising by FTSE 250-listed Softcat, which generated £350 million to part fund the acquisition of a US-based IT solutions provider. The shares were placed at 1,890p, representing a 4% discount.

Peel Hunt, which acted as joint global co-coordinator, said Softcat's position as a UK-listed company might previously have been viewed as a disadvantage due to questions over the source of funds, timing and uncertainty over ability to complete.

This was partly because the transaction would have previously been classified as Class 1, meaning that a circular and shareholder vote were required. Changes in regulation have meant a shift to being classified as a ‘significant transaction’.

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Peel Hunt said: “This change is a fundamental enhancement to the position of UK-listed companies when completing acquisitions and raising equity.”

Other material fundraisings for UK companies this year include £1.9 billion for Rosebank Industries and £800 million for United Utilities, as well as smaller sums for Hammerson, Atalaya Mining and Ceres Power.

The City firm added: “In our view, the considerable body of regulatory reform by the FCA, LSE, and the government transforms the attractiveness of London as a listing venue.

“We expect companies to become increasingly proactive in using the market to accelerate investment and growth through acquisitions.”

On IPOs, Peel Hunt said last month that the UK's new listings market was still open but that geopolitics meant firms were increasingly looking to 2027 for their debuts.

It said: “The UK IPO pipeline remains the strongest it has been since 2021. However, many timetables continue to be pushed to the right as issuers and shareholders monitor market conditions and the uncertain macro outlook.”

The Middle East war previously caused Airtel Africa to delay the launch of the Airtel Money IPO from the first half of the year.

With operations in 13 markets in Sub-Saharan Africa, the mobile financial services business meets the needs of a young and fast-growing population with limited access to traditional banking.

Revenue reached $1.35 billion in the year to March, representing compound growth of 32% since the 2018 financial year. Earnings have grown 40% in US dollar terms in the same period.

The company also disclosed an underlying margin of approximately 50% and a pre-tax cash conversion ratio above 90% in each of the last three financial years.

The business is debt-free, capital-light and highly cash generative, which is why the IPO consists solely of shares sold by existing shareholders and no new capital is being raised.

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Airtel Money's proposed dividend policy is set to focus on sustainable and predictable shareholder returns, but with the flexibility to invest in future growth. It intends to maintain a minimum total dividend pay-out ratio of 80% of consolidated net profit after tax.

Chief executive Ian Ferrao said: “A London listing will underpin our next wave of growth. The opportunity ahead of us is substantial and, importantly, there are many demographic and digital tailwinds within the markets that we serve.

“Digital transaction volumes across our footprint are forecast to grow around fivefold by 2031, and we can capture this opportunity by accelerating conversion of the growing Airtel Africa telco subscriber base, moving customers onto our app where they transact more often, and by broadening the range of products we offer them.”