Russia's IPO boom

Russian IPOs are back and billions of dollars have already been raised and billions more of listings are in the pipeline in the coming year. The Russian corporate story is hot again for the first time in about a decade.

International portfolio investors are currently overweight on Russia not because they have been buying the household names, but because they have been snapping up all the new issues coming to market in the last year.

Six Russian companies IPO’d in the last year just as investor sentiment was hit by the coronavirus (COVID-19) pandemic and the risk of possible new Western sanctions on Russia following the poisoning of Kremlin critic Alexei Navalny. But the pandemic is fading and a détente was reached with US president Joe Biden in Geneva on June 16 that reduced perceived risks. Now there is some $10bn in potential new IPOs in the pipeline, according to analysts.

Growth stocks have been the favourite, many of them from the new economy like Russian e-commerce powerhouse Ozon, which raised $1.2bn last year. But increasingly new names are catching the headlines such as the hard discounter Fix Price, which raised $2bn in March, residential developer Samolet that raised $40mn in October, private healthcare company EMC that raised $450mn in July and forestry group Segezha that raised $414mn in April all listing shares this year in the country’s biggest listings spree since 2008. Other industries represented by companies planning to go public soon include retail, insurance, car-sharing and automotive leasing, and financial services.

The most recent addition to the IPO family is Renaissance Insurance, one of Russia’s leading diversified universal insurance companies, that announced on September 27 it intends to list in the near future and hopes to raise $290mn (RUB21bn) with a valuation of around $1bn-plus. The company has invested heavily in its digitalization of core services presence and wants to raise capital to invest more and use its digital platform as a cost-efficient market consolidator, as well as some of the shareholders hope to take some cash off the table.

The IPO bonanza has seen exchanges wooing Russian companies hoping to go public. NYSE, Nasdaq and the London Stock Exchange are trying to attract new Russian members after Ozon listed shares on Nasdaq in November, successfully tapping into the deep US pool of tech investors.

Fix Price went for dual listing in London and Moscow in March as Russian firms increasingly favour their home market after it was hooked into the international settlements and payment system Clearstream. Now foodtech company VkusVill and SPB Exchange are among many considering selling shares in the US, while information technology solutions provider Softline may opt for a dual listing in the UK and Russia.

New York has not seen such a flurry of Russian share offerings since the initial wave of IPOs in the 1990s. The LSE aggressively marketed itself to prospective clients in the noughties, but activity almost completely died off following Russia’s annexation of the Crimea in 2014.

The market was dead until Russian children’s good retailer Detsky Mir floated in 2017 in a highly anticipated IPO, followed by Russian shoe retailer OB group (Obuv Rossii) which raised $105mn with an IPO in Moscow in October 2017. But then the listing action died completely and was only revived last year. Now the listings frenzy is gathering momentum.

New York has been out of favour as a listing venue, but the Ozon seems to have triggered a comeback. Four Russian companies are targeting New York deals in the coming months.

London, long the go-to international exchange for issuers that wanted to supplement Moscow, is now feeling the heat as it has been challenged by both Moscow and New York. The Moscow Exchange (MOEX) has also been aggressively marking its services to Russian would-be plcs and has invested heavily to significantly improve its services. Increasingly major Russian companies have chosen to do Moscow-only listings.

The sudden appearance of a large and growing pool of retail investors has proved to be increasingly enticing for Russian corporates to list at home. Falling bank deposit rates have caused millions of Russian retail investors to cast about for something with a better return and they have been flooding into equities to now account for some 40% of the turnover on MOEX.

At the same time, some internationally traded Russian entities have returned home as MOEX actively pursued a programme to unwind ADR proxies that are listed on international exchanges and bring their investors to Moscow to hold the underlying Russian traded shares directly, cashing in on the traditional spread between the ADR proxy and the locally listed shares in the process. Other Russian companies, such as supermarket chain X5 Retail Group and banking group TCS Group, have chosen to add to their international listing with a second Moscow-based listing. Russia’s most successful real estate developer PIK has opted to delist from its overseas exchange entirely and move its shares back to Moscow.

Further out there are some very big potential IPOs in the pipeline. Russia’s petrochemical behemoth Sibur has been talking about an IPO for years in one of the most highly anticipated listings from the Russian market. While the company told bne IntelliNews in an exclusive interview it is committed to an IPO, it is the question of timing that has not been decided yet. Likewise, metal and mining giant Metalloinvest may sell shares to the public as early as in 2022. Both companies may be valued at least $20bn each in their respective offerings.

Below is the breakdown of Russian companies planning IPOs by potential listing location and of those that recently completed IPOs by location.