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companies look to raise more money to expand. The preference for using equity to raise money is also helped by the high interest rates on bank loans. Thanks to high inflation, the Central Bank of Russia (CBR) hiked the prime rate to 16% and is expected to hike again to 17%, making bank loans an expensive source of capital.
Companies from a variety of industries are launching IPO plans: information technology, fintech, gas stations, light industry, retail, which will allow investors to diversify away from the traditional oil, gas and banks that have been the mainstay of Russian portfolio investing for years.
What is new is that it is not the industry leaders and blue chips that are offering their shares for sale, but, as a rule, companies with high business development dynamics, who want to increase their market share. The growth of profits and the potential for more growth is what is making these companies interesting to investors.
“According to the Moscow Exchange , this year there will be about 20 IPOs - both primary and secondary, when investors are offered additional blocks of shares,” the head of the Sber broker Aisha Kubezova told Vedomosti. “We hope that the number of placements will
grow, as will their volumes. Given the current market conditions, this is a
win-win situation for all parties - on the one hand, investors receive new
investment opportunities, which they are so in demand against the backdrop of
problems with access to foreign markets, and companies have the opportunity to
profitably locate at attractive levels and long-term money for business
development.” The peculiarity of the current placements, as well as the entire Russian stock market after February 2022, is the dominant role of retail investors, said Stanislav Sukhov, Senior Project Leader at Frank RG. Institutional investors are not showing the same activity: demand from them is small, according to Sukhov.
Nevertheless, despite the sharp pick up in listing activity, the overall volume of IPO in market capitalisation terms remains low and the free floats thin. Often the free float is not more than 5%, according to Sukhov.
Eight listing have taken place this year: the alcohol group Kristall , the vendor Diasoft , Carsharing Russia (Delimobil), the leasing company Evroplan , the microfinance organisation Zaimer , MTS Bank, the microelectronics manufacturer Element, and the developer of the videoconferencing service IVA.
128 RUSSIA Country Report July 2024 www.intellinews.com