Page 126 - IFR Opportunities in Russian capital markets

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ifrintelligence reports/Opportunities in: Russian Capital Markets
Figure 8.4: Sources of private equity capital, Russia vs India, 2006 (US$bn)
7.5
*Liquid or “investable” private equity capital
Source: Baring Vostok, Baring India
3
55 2
40
Future challenges
BVCP's Calvey warns that the best investing years may already be over. "The last six years will come to be seen as the best investment period of our lifetimes", he says. "It's easier to go from (sales of ) US$50m to US$100m than from US$500m to US$2.5bn. One reason for the growth was consolidation in many industries, but you can only do this up to 100%, and then have to grow organically", he says.
Maybe the biggest stimulus to the growing interest is the multiplying number of exits available for the private equity investor. For most of the last 15 years the only possible exit was a sale to a strategic investor. With the volume of M&A over US$50bn a year there is an expanding number of Russian and international buyers. At the same time, the ballooning number of IPOs gives a viable alternative. And the advent of leveraged buy-outs (LBOs) and the first management buy-outs (MBOs) appearing provide a third alternative.
The rapid growth in the number and size of Russia's IPOs is widely quoted, but strip out the natural resources sector, the state company IPOs and telecoms giant AFK Sistema, which raised US$1.5bn at the start of 2005, and the growth of Russia's IPOs has been much more even, rising from US$0.4bn in 2000 to US$3.8bn in 2006, according to Russia Partners, a fund run by Richard Sobel (see Figure 8.5).
The mega-IPOs have helped bring about the development of the IPO market, but underlying these extraordinary events the IPO market is following a normal course of development, with an increasing number of companies coming to market from increasingly diverse sectors making it increasingly easy to float any type of company.
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Indian dedicated PE funds (institutional foreign capital)
Russian dedicated PE funds
Global PE & VC funds (India allocation)
Global buyout & VC funds (Russia allocation)
Domestic Indian PE capital & “Oligarchs”
Domestic Russian PE capital & “Oligarchs”