Page 102 - RusRPTDec21

effective November 28. Previously, Russian-domiciled issuers were only allowed to place up to 25% of a company and up to 50% of any new issues in DRs. At the risk of stating the obvious, the rule change will have no effect on companies that are domiciled abroad.
Some years ago, this rule change could have had quite an effect on the market given the premiums for foreign over domestic listings and investors' limitations in holding domestic listings. However, that gap has narrowed. Overall, we find the rule change positive for background sentiment for the market, but unlikely to have a material impact on existing stocks. Details of our view:
> Entities under US or EU new equity sanctions are still unlikely to be able to create any new lines abroad. In any case, most already have foreign DRs, and those that do not have no clear reason to do so and have not flagged any desire to launch programs. Moreover, investors in such companies are rather likely to have access to the local market regardless.
> MSCI has for several years disallowed a switch from foreign to local listings for Russia as part of their response to sanctions. Only Magnit, MTS, Novatek, PhosAgro and Sistema are now indexed by MSCI on their foreign listings. Having been asked by clients, we see no reason to think MSCI or any index providers would see cause to react to the CBR's decision. Generally speaking, local shares are preferred by the index providers where possible, as they are by investors who prefer to avoid implied fees.
Meanwhile, canceling the restrictions can be seen as a slight positive for background market sentiment, as some companies could find an easier path to simultaneous Russian and foreign listings to be attractive. However, recently listed companies have largely been choosing to list commons both in Russia and abroad, including for the reason to ensure MSCI eligibility, so again, today's rule change does not have the obvious impact it would have some years ago.
The forthcoming rule change could also be considered another argument for a government push for companies to change their domiciles to Russia, but that topic is rather too academic for our purposes.
Mercury Retail Holding PLC postponed its IPO, the company said on November 9. The largest ultra-convenience store operator and the third largest food retailer in Russia, following its announcements on 27 October and 3 November 2021 regarding its intention to conduct an initial public offering (the “IPO”) of global depositary receipts (the “GDRs”) and to list on Moscow Exchange, today announces the decision to postpone its proposed IPO in light of the current market conditions.
Russia’s Mercury Retail Holding, the largest ultra-convenience store operator and the third largest food retailer in Russia, announced the indicative price range in respect of its proposed initial public offering of global depositary receipts and listing on Moscow Exchange on November 3.
The company set the price range at between $6 and $6.50 per GDR, implying a market capitalisation for Mercury Retail of between $12bn and $13bn, the company said in a press release.
102 RUSSIA Country Report December 2021 www.intellinews.com