Is your halal food company thinking of going IPO? What are your considerations and options?

The halal food industry is at an early stage of its development but IPOs are notably being leveraged. Recent examples are DagangHalal and Al Shaheer Corporation. As companies in the halal food industry mature, what are the considerations and options for them to go IPO?

Muslim consumers were estimated to spend $1.17 trillion on F&B in 2015 and this is expected to reach $1.9 trillion by 2021 at 9 percent CAGR, according to the State of the Global Islamic Economy 2016/17 report. However, Muslim expenditure on halal-certified F&B is less clear-cut, and the SGIE report estimates this spend at $415 billion in 2015.

The halal food industry, while long established, is in its infancy in comparison with the global, mainstream food industry. The halal industry is highly fragmented across its value chain and hence has significant scope for consolidation. The recent emergence of IPOs by halal food companies is a sign of maturity in the sector, with DagangHalal, and Al Shaheer Corporation representing notable examples.

Malaysia-based DagangHalal was established in 2007. The company operates as a halal trading B2B platform with an expansive directory of halal-verified F&B product importers and exporters. DagangHalal became the first halal food company to list on the London ISDX Growth Market Exchange. It was valued at $20 million.

Pakistan-based Al Shaheer Corporation is a halal meat company founded in 2008. It has a strong export market presence and a branded retail network of butcher shops. The company is listed on the Karachi Stock Exchange and has raised over $22 million as of 2015.

In addition to these IPOs, BRF SA, Brazil’s largest processed food producer is considering an IPO for its Sadia Halal, which was launched in 2016. The company wants to raise over $1.5 billion through an IPO. BRF is considering selling stock in this business unit, which it plans to operate as a separate subsidiary to supply Muslim-majority markets.

CONSIDERATIONS

There are several considerations for halal food companies that have scaled and are seeking to launch an IPO.

Consider viable alternatives

IPOs are a key step in raising financing, but there are other avenues for raising financing – a key first step is seeking Private Equity investment.

While entrepreneurs may fear giving up a stake in their company, private equity brings significant benefits, including access to robust experience in scaling companies, and best-in-class operational expertise.

Approaching mainstream private equity firms may be a difficult task, which is where dedicated Islamic Economy events come into play.  A notable example is an investment forum in London scheduled for November 2016 by Frontier Exchange. The event, “Islamic Enterprises", plans to bring together institutional investments from across Europe and the Middle East, and high-potential Islamic Economy businesses.

Be prepared with data, and to discuss the opportunity

The Islamic Economy is beginning to receive significant coverage through press and media – referencing the latest data, and highlighting success stories is a key step to conversing with potential investors.

Establish a robust organization structure

A necessary pre-cursor to IPO is establishing a robust infrastructure, separating financial and operational activities, and setting up a dedicated investor relations department.

Discussing the organizational adjustments made by DagangHalal, Khairil Ismahafiz, Dagang Asia CEO commented in an interview with Salaam Gateway, “We’ve had to do things in a very robust way, and modify our organizational approach from when we were a small company several years ago –  this includes developing a separate investor relations department, and ensuring we’re prepared for scrutiny.”

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