Dubai rankings set stage for firms to go public - Gulf News

Dubai The naming of Dubai's Top 100 small and medium enterprises (SMEs) has boosted hopes in the local industry about the possibility of getting additional funding through stock market listings. According to Nasdaq, a minimum of 13 to 14 companies is needed to create a secondary market.

The combined turn-over of the top 100 SMEs, based on the latest financial records, is an estimated Dh2.3 billion. Their total assets are an estimated Dh1.4 billion and the combined profits stand at Dh220 million.

Out of the top 100, 62 per cent are in the services sector, 13 per cent in manufacturing and 25 per cent in trading.

Dimensions Healthcare, Ecobility Energy solutions, propertyfinder.ae, Intercoil International and Mepco Gulf were named the top five SMEs.

Dubai SME, an agency of the Department of Economic Development (DED), on Sunday announced the first Dubai SME 100 rankings after whittling the numbers down from an initial 1,092 businesses that entered the fray. Among all applicants, only 45 per cent had the correct structure in place.

The ranking aims to market the capabilities of Dubai's top-performing SMEs to regional and global investors and provide additional opportunities for them to raise capital.

"Dubai SME's role is to create a platform for evaluating these top SMEs," said Abdul Baset Al Janahi, CEO. "Investors in particular will be interested to know who these promising SMEs are and perhaps invest in them. Through Dubai SME 100, we hope to create an indirect pipeline of SMEs for a secondary listing market in Dubai.

"This will help SMEs gain additional external capital, new talents, markets and brand enhancements."

Formidable presence

The SME sector in Dubai accounts for more than 90 per cent of all enterprises and 40 per cent of the workforce. Together they make up 42 per cent of the annual value-added created by the emirate.

With this new ranking Al Janahi also hopes to promote the importance of corporate governance. "If we are planning on taking some of the SMEs to the next level such as a secondary market we need to prepare these companies to adopt corporate governance," said Al Janahi.

"Too many companies were run like family businesses and banks have a difficult time evaluating companies and giving them the right financial services. Having the right structure will help these businesses to grow."

To be considered in the ranking, the business structure of the applicants must be based on the official definition by Dubai SME. The candidates must have audited financial statements for at least three years and be an independent entity registered in Dubai (under DED or with the free zones).

This comes at a time when SMEs in the UAE still struggle with financial constraints, according to Insight Discovery.

Funding issues

Although SMEs represent a huge opportunity for banks and financial institutions, they are often considered too risky to support.

"SMEs make a significant contribution to the economy and to employment, yet they currently account for only 4 per cent of total bank lending," said Edward Allely, managing director of strategy and credit at Gulf Finance. "The gap between supply and demand for financing means that many promising SME businesses struggle to fully capitalise on their growth potential."

According to Insight Discovery's report — ‘SMEs and Aggressive Growth: What are the challenges that need to be overcome?' — the other challenges facing SMEs in the UAE include high upfront costs such as licensing costs, visa fees and office costs. Relative to other parts of the world, the GCC governments do not have tax revenues that can be recycled as assistance to SMEs.