UAE’s IPO pipeline set for growth with potential Cafu stake sale

The UAE’s initial public offering pipeline is set to become more diverse with Dubai-based fuel delivery start-up Cafu reportedly considering a stake sale amid strong investor appetite for new listings.

The fuel delivery and vehicle service company is looking to raise funds by selling a stake in the business for the first time, Bloomberg reported, quoting sources.

The start-up is working with financial advisory and asset management firm Lazard for the IPO, but the discussions are at a preliminary stage, and no final decisions have been made, it added.

However, the company has not confirmed the exact details of the amount or the date of the IPO.

Cafu has been delivering fuel to customers’ doorsteps at the same price as petrol stations, without charging an extra markup. In recent years, it has also introduced an at-home car services package, which consists of on-demand battery, tyre change services, engine oil change, and emergency rescue services.

The company was launched in Dubai in 2018 by entrepreneur Rashid Al Ghurair, who comes from one of Dubai's most prominent business families, and has operations in Oman and Egypt.

Cafu charged basic delivery fees from 2018 until the start of the Covid-19 pandemic. However, since the pandemic, the company waived its delivery charges.

But in a shift in its business model, the company said in a circular to clients on Thursday that it will reintroduce fuel delivery service charges.

“Keeping a service like this running, citywide 24/7, … takes a lot behind the scenes. We’ve absorbed those costs for as long as we could. Now to continue delivering the experience you rely on, we are reintroducing a small delivery fee,” the Cafu note said.

The priority slab, which promises full delivery in 20 minutes, will be charged at Dh20 per delivery. Standard delivery, between 30 minutes and two hours, will be charged at Dh16. For overnight orders between 12am and 6am, a Dh12 fee will be applied, the note stated.

“The UAE’s mega IPO bull wave will likely see another addition to its kitty. Interestingly, for Lazard, which has recently opened its office in the UAE, the transaction’s success would mark its entry into the region, where its prolific competitors like Rothschild hugely dominate,” said Vijay Valecha, chief investment officer at Dubai investment company Century Financial.

“Apart from these revised slabs, the company has already earned revenue streams from multiple verticals introduced over the past few years. These include the battery, car wash, tyre change, engine oil replacement, and emergency rescue services. The app also allows for third-party partner advertisement, a likely advertisement and loyalty-related revenue stream for the company.”

While Cafu is the leading fuel delivery operator in this region, globally, the space is dominated by a couple of players, Mr Valecha said.

The latest market reports point to North America as the biggest market for this segment. The US is dominated by many apps, including Yoshi, Gaston, Ez Fill, Booster and Fuelster. Besides these start-ups, major American oil companies Shell and Mobil have introduced services in this segment, he added.

The global on-demand fuel delivery market size is projected to touch $2.37 billion by 2033, recording a compound annual growth rate of 15.97 per cent from 2025 to 2033, according to market intelligence firm Business Research Insights.

There has been a listings boom in the UAE in the past few years as the Arab world’s second-largest economy continues to grow amid diversification efforts.

There were seven IPOs across the UAE last year, including Talabat Holding, major retailer Lulu Group, ADNH Catering, NMDC Energy and Alef Education. IPOs in the UAE accounted for 47 per cent, or $6.2 billion, of total Gulf proceeds last year, PwC said in a report.

Overall, 2024 saw the highest Gulf IPO volumes on record, with 53 listings across the region and a total of $13.2 billion raised, the report said.

In 2021, the Dubai Financial Market unveiled an incentives programme to encourage new IPOs from private sector companies in key economic sectors that contribute to the country's gross domestic product.

The incentives included financial support to the cost of listing on the bourse, post-listing support through participation in its international roadshows regionally and globally, and a three-year waiver on listing fees.

The same year, Dubai revealed plans to list 10 government and state-owned companies on the DFM as part of a broader strategy to double the financial market's size to Dh3 trillion.