Syed Azfar Shakeel, CEO of Lumi Rental Company (Lumi), tells Maaal that the company holds 7% share of the Saudi car rental market, which is both substantial and expanding.

Outlining the strategic priorities of the business, Shakeel said that Lumi’s strategy is based on three main pillars: building a pipeline of future revenue and asset growth through long-term lease contracts, achieving scale and increasing profitability by expanding Lumi’s local presence, and maximizing purchase price recovery from fleet disposal (the sale of used vehicles).

Lumi has launched a public offering of 16.5 million shares, representing 30% of its capital, on the Saudi Exchange (Tadawul). The retail subscription period will take place on a single day, September 12th, following the announcement of the final offer price. The price range for the shares has been set between 62 and 66 Saudi riyals per share, and the final offer price is determined through an institutional book-building process.

The company has hired Saudi Fransi Capital as its financial advisor, lead manager and joint bookrunner, with EFG Hermes also a joint bookrunner. Riyad Bank, Banque Saudi Fransi and Saudi National Bank have all been appointed as receiving agents.

Lumi’s revenues in 2022 totaled SAR 782.6 million, with annual growth of 50.1%. The company achieved revenues of SAR 500 million in the first half of the current year, a 48.6% year-on-year increase. This growth is also reflected in Lumi’s bottom line, with EBITDA of SAR 437.3 million in 2022 at an EBITDA margin of 55.9% and annual growth of 37.7%. For the first half of the current year, the company recorded EBITDA of SAR 271.7 million, growing by 28.9% compared to the first half of 2022.

Lumi’s net income increased by 35.4% to reach SAR 143.7 million in 2022, with a net income margin of 18.4%. In the first half of 2023, net income increased by 38.8% year-on-year, to SAR 100 million.

CEO Q&A

Lumi is set to proceed with an IPO and to list its shares on the Saudi Exchange. Can you give us an overview of the company, focusing on its establishment, market share, fleet, and capital structure?

Lumi stands as a prominent car rental company in the Kingdom, distinguished by its diverse range of services. These encompass leasing services for corporate and government sector clients, online car rentals, an extensive network comprising 35 branches at airports and cities throughout the Kingdom, as well as a robust presence in the used car sales market.

Lumi has achieved significant growth across the business since its establishment by Seera Group Holding in 2006. Following Seera’s strategic transformation program, our fleet increased from 3,603 in 2006 to 24,730 vehicles in 2023, as of 30 April 2023.

In less than a decade, Lumi has emerged as one of the leading players in the car rental sector in Saudi Arabia, with 7% share in a large and growing market that has high barriers to entry. Our dynamic and holistic business model and vast operational footprint provide investors with a unique opportunity to participate in a sector that benefits from powerful macroeconomic and structural tailwinds and is positioned for significant growth.

What is the Company’s primary growth strategy, and what are your long-term objectives?

Our growth strategy is based on three main pillars: building a pipeline of future revenue and asset growth through long-term lease contracts, achieving scale and increasing profitability by expanding our local presence, and maximizing purchase price recovery for fleet disposal.

To execute the strategy, we prioritise expanding our fleet size as we secure new long-term lease contracts with Corporate and Government clients.

We also plan to further expand our branch network and provide logistics and fleet management support to facilitate land transportation needs for large-scale events.

Finally, we plan to dispose of our fleet with maximized purchase price recovery through our used car sales showrooms and by digitizing our bidding process for used cars. It is worth mentioning here that in addition to the Jeddah and Riyadh showrooms, we plan to open a new branch in Dammam.

Is the Kingdom’s expanding tourism sector playing a supportive role in the car rental and leasing space? How is your sector benefiting from Vision 2030?

Saudi Vision 2030 reflects the Government’s ambitious plan to transform the Kingdom into a diversified economy, with non-oil Government revenues projected to increase sixfold to SAR 1 trillion by 2030G. With this in mind, we expect the growth of the transportation sector to play a key role in enabling and supporting the objectives of Vision 2030.

Supported by its strategic geographical location, access to local, regional and international markets, and its unique position as the heart of the Arab and Islamic worlds, Saudi Arabia is well-positioned to cement its role as a key regional logistics hub.

Moreover, the regulatory environment has recently experienced several critical reforms to transform passenger mobility rental services in the Kingdom into a world-class system to support broader national growth plans across other sectors of the economy.

The Kingdom’s exciting tourism plans are also crucial in the continued healthy growth of the car rental market. As the Kingdom continues accelerating its diverse tourism development plans, such as multiple landmark tourism giga projects, we expect to maintain our market-leading position and capture further gains and value from these positive catalysts.

How many employees are in Lumi, and what is your current Saudization rate?

The Company has over 750 employees across the Kingdom with a Saudization rate in excess of 35%, while 75% of our management team are Saudi nationals.

Can you give us an overview of the Company’s financial performance over the past year?

We reported revenue of SAR 782.6 million in 2022G, achieving year-on-year growth of 50.1%, and revenue of SAR 500.0 million in the first half of 2023G, increasing by 48.6% compared to the first half of 2022G.

Lumi achieved an EBITDA of SAR 437.3 million with an EBITDA margin of 55.9% in 2022G, recording year-on-year growth of 37.7%. We reported EBITDA of SAR 271.7 million, with an EBITDA margin of 54.3%, in the first half of 2023G, achieving growth of 28.9% compared to the first half of 2022G.

Net income increased by 35.4% year-on-year to SAR 143.7 million in 2022G at a net income margin of 18.4%. In the first half of 2023G, net income increased by 38.8% to SAR 100.0 million with a margin of 20.0%.

The total value of the Company’s assets as of 30 June 2023G was SAR 2,238.9 million, compared to SAR 1,844.3 million as of 31 December 2022G.

Can you tell us more about your long-term agreements and partnerships with governmental or corporate clients?

Currently, our client base includes 200 corporations and government agencies, and the number is growing with time.

As part of our growth strategy, we plan to continue expanding our fleet size, focusing on securing new long-term lease contracts with Corporate and Government clients. We expect a number of lease agreements with the government and semi-government entities to be announced to the market in due course.

For example, we recently signed a 34-month leasing agreement of SAR 42 million with Saudi Post, effective May 2023, to supply 855 vehicles.

What digitalization initiatives have you taken so far, and do you have any future digitalization plans?

We have been actively digitalizing our processes across various segments to enhance customer experience and operational efficiency,

For the lease segment, we have successfully developed a lease management portal that allows our clients to raise vehicle maintenance and repair requests seamlessly. Additionally, they can conveniently access and review all relevant lease documentation and fleet reports through this portal.

We have launched a user-friendly digital application and website in the rental segment. This platform enables customers to easily register their information and submit the necessary documentation, facilitating instant reservations for rental vehicles.

Continuing our commitment to digital transformation, we are currently in the process of introducing a digital portal for our Used Car Sales segment. This portal will allow customers to submit bids digitally, streamlining the sales process and making it more accessible and efficient for everyone involved.

Through these initiatives, we aim to provide our customers with a seamless and convenient experience while optimizing our internal operations for improved efficiency.

Please share an overview of the offering and its size.

We are offering 16,500,000 shares, representing 30% of our issued share capital. The price range for the Offering has been set between SAR 62 and SAR 66 per share, implying a total offering size of SAR 1,023 million to SAR 1,089 million. The Price Range for the Offering implies a market capitalization at the time of listing of SAR 3,410 million to SAR 3,630 million.

Subscription to our Offering is available to two tranches of investors: “institutional investors” (comprising parties entitled to participate in the book-building process as specified by the Capital Market Authority); and “retail investors” (Saudi nationals, GCC nationals, and foreign residents in the Kingdom who have a bank account with one of the receiving banks and with the right to open an investment account with a Capital Market Institution).