Page 51 - IFR Opportunities in Russian capital markets

CHAPTER03
ifrintelligence reports/Opportunities in: Russian Capital Markets
However, at the start of January 2006 the Kremlin lifted the so-called ring-fence – special rules that prevented foreigners from directly owning the companies’ locally traded shares – and the value of the company soared.
The Kremlin followed up in July of the same year with the historic IPO of state-owned oil major Rosneft which raised US$10.6bn, and in March 2007 raised another US$4.4bn with a second placement of shares in retail banking behemoth Sberbank.
VTB, the second biggest bank in Russia, floated 22.5% of its stock to raise US$8bn in May 2007 and state-owned diamond monopolist Alrosa has announced plans to launch an IPO. Indeed, a central tenet of the development plan of all the state's national champions that were being set up in 2006–07 is an IPO, not only to raise investment cash, but more importantly to bring in an expert partner or strategic investor that can provide the crucial management skills and technical know-how.
The state's growing role in the stock market obviously has positive implications for both the development of the capital markets and corporate governance, as the state is now a major stakeholder.
Table 3.3: Ownership of Russian equities, 2003, 2006 (%)
*Based on closing prices as of end November 2006
Source: Company reports, Alfa Bank Research
Mid-2003 Feb 06 Nov 06*
State 20.0
29.6 35.2 21.2 22.0 20.4 15.4 28.8 27.4
100.0 100.0
‘Management & insiders’
Strategic Industry investors
Free float
Total 100.0
38.0 17.0 25.0
Figure 3.4: State voting stock in top 20 RTS companies, 2000 – 06 (%)
% 50
40 30 20 10
0
Source: Company data, Aton estimates
18.1
Jan 00
10.8
Jan 04
38.9
Dec 06
IPOs
In the 10 years between the founding of the market in 1995 and 2005 Russia saw just 11 IPOs, which raised a total of US$1.3bn (if flotations on international markets are included). This method of fund raising really took off in 2005 before gathering momentum in 2006, when 15 companies floated raising US$17.7bn. This was an excellent result, even if the US$10.6bn that state-owned oil company Rosneft raised is counted out of the tally. Table 3.4 details the IPOs between 1996 and 2006.
And the pace is expected to continue to quicken in 2007. Analysts say that, at the start of the year, some 90 companies had expressed an interest in an IPO and expect them to raise something like US$30bn (see Table 3.4).
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