DUBAI, Aug 24 (Reuters) - Saudi Arabia's Lumi, one of the largest auto rental firms in the kingdom, on Thursday announced plans to proceed with an initial public offering on the Saudi Exchange.

Riyadh-based Lumi said it expects to issue 16.5 million existing shares, resulting in a free float of 30%.

Sources told Reuters in April that Lumi had hired Saudi Fransi Capital as financial advisor and bookrunner and EFG Hermes as bookrunner to arrange the sale of 30% of its shares.

Lumi confirmed those appointments and said Riyad Bank, Banque Saudi Fransi and Saudi National Bank have been appointed as receiving banks.

The share sale is set to be a litmus test for the Gulf IPO market after a slow summer period.

Issuers from the Middle East and North Africa raised more than $5 billion in the first half of this year, consultancy EY said in a report earlier this month, with the bulk coming from Saudi Arabia and the United Arab Emirates.

The proceeds were down 60% compared with the first half of last year, which was an exceptionally strong year for the Gulf IPO market.

Deal activity is expected to remain "healthy" in the second half of the year and into 2024, EY said in the report.

Lumi is a wholly-owned unit of Seera, a Saudi travel company formerly known as Al Tayyar Travel Group.

The auto rental firm ranked itself as the third-biggest operator in the country with a market share of about 7%, based on its fleet size in 2021, according to its IPO prospectus.

Its fleet grew to 24,730 by the end of April from more than 19,600 at the end of September 2022, the prospectus said.

Lumi made a profit of 100 million riyals ($26.66 million) in the first half of 2023, up from 72 million riyals in the first half of 2022.

The country's car rental market is expected to grow at a compound annual growth rate of 8.6% up to 2027, to reach a market size of 9.8 billion riyals, according to research from Glasgow Research & Consulting. ($1 = 3.7514 riyals) (Reporting by Hadeel Al Sayegh; Additional reporting by Yousef Saba; Editing by Susan Fenton)