Equity Financing in Russia

This is an archive of my Blog from 2007. The posts are presented in format as they were published.

Wednesday, May 7, 2014

Information is the oxygen of the modern age – Russian IPOs - RIP


I do hope that some scholars and businesspeople will find certain information that can be used these days. I have published a total of 105 posts.
 Interesting to note: I was employed at FINAM - the biggest stock broker in Russia. At that time NO ONE was publishing ANY Blogs in English about the Russian Equity Financing (do not know what is the current situation). During my stay with FINAM, NOT A SINGLE PERSON from the company was interested and even acknowledged the fact (even FINAM's high quality Analyst Department). Despite that, I witnessed a flow of visitors (listed below) and was invited to run the Financial Page at The Russia Blog. After I was notified that FINAM does not care for Equity Financing, I moved to other business - those interested may look at my archive of Global Mining & Financial Issues Blog - the one that was more popular (and after I recently started its revival - more people are reading and commenting).
Anyways, here is the final post


Information is the oxygen of the modern age – Russian IPOs - RIP

Private information is practically the source of every large modern fortune
 Oscar Wilde

Now it is 8 months since my blog exists. I think my experiment is to a certain level a success. This shows the updated list of the corporate servers that generated visitors to my pages in these months.
Interesting observation – I have not posted much in August but still the visitors are coming. That surprises me much and shows that there still a niche that is not much filled.
And here is the latest updated list of those who read.

Academy Of National Economy, Accenture, Agefi, Agora Inc., Aig Brunswick Capital Management, Alba Aliance Bank, Alegro Capital Ltd., Alfa-bank Moscow Russia, Allen And Overy, American Capital Strategies Ltd., American International Group, Ask Jeeves Inc., Associated Press, Atherton And Associates Inc., Atlantic Broadband Finance Llc., Aton Moscow, Baillie Gifford & Co., Balanoff & Balanoff, Banco Santander Totta S.a., Bank Of Finland, Bank Of New York Europe, Bank One Columbus Na, Bank Slaski S.a. W Katowicach, Banque Meespierson Bgl Sa, Banque Nationale De Paris, Banque Nationale De Paris – Bn, Barclays Capital, Baring Vostok Capital Partners, Bear Stearns Security, Ben Scole Financial Inc., Bigdough, Bloomberg Financial Market, Boston-Consulting, Brandsmiths Ltd., British Broadcasting Corporation, British Sky Broadcasting Ltd., Broadcast Company TV-news, Brunswick Investment, Bryan Cave Mcpheeters & Mcrobe, Bulgarian Government Network, Ca IB International Markets Ltd., Cariverona Banca Spa, Carnegie Mellon University, Cartesian Capital Group, Cdc Group Plc, Chadbourne-parke, Charlemagne Capital Ltd. , Charles Schwab & Co. Inc. , Chivas Brothers Ltd. , Chris Fowler International Ltd., Citadel Investment Group, Citic Capital Markets Holdings, Citicorp Global Information Network, City Of Lodon Investment Mgmt, Clearwire Llc, Clifford Chance, Cogeco Cable Canada Inc., Commercial Bank Rosbank, Compass advisers llp., Computasoft Ltd., Control Risks Corp., Cowen & Co., Credit Lyonnais Rusbank Moscow, Credit Suisse Group, Creo Products Inc., Cushman & Wakefield Stiles & R., D. E. Shaw & Co., Dagbladet Brsen A/s, Daimlerchrysler Ag, Dell Computer Corporation, Deloitte And Touche UK, Deloyt.Moscow, Denizbank A.s., Deutsche Bank, Dexia Banque Internationale, Dexia Credit Local, Dion (kddi Corporation, Doc-international Trade Admin, Dow Jones-telerate,,Dresdner Kleinwort Wasserstein, Dresdner-kleinwort-benson, Eastman Kodak Company, EBRD, Electric Lightwave Inc., Energis Uk, Ernst And Young Llp., Ernst&young (cis) B.v ., Eton Park Capital Ltd., Eurasiagroup, Euromoney Institutional Investors, Export Import Bank Of The U.S., Farallon Capital Mgmnt, Farner Pr Und Consulting Ag, Fascinations Toys And Gifts, Federal Home Loan Mortgage Corp./, Fiberaccess Benq Europe B.v. S, Fidelity Investments, Financial Dynamics Inc. , Financial Services Authority, Flextronics International Sweden, Focus Tv Produktions Gmbh., Foote Cone & Belding Communications, Fortress Investment Group Llc., Garantibank Moscow , General Electric Company, Genesys Inc., Gga Maur Ebmatingen, Glencore International Ag, Global Diachirisi Kefalaion Ae, Global Sage Ltd., GMD Solutions, Inc. , Gni Limited, Goldman Sachs Goldman Sachs Company, Google Inc., Government Of Singapore Invest, Grand-tornton-trid, Green.ch Ag Brugg Switzerland, Greenwich Capital Markets Inc., Gustav W. Rogge Gmbh & Co. Kg , Hagstromer & Qviberg Fondkomis, Hansabank Ltd., Harro Hoefliger Verpackungsmas, Harvard University, Hemscott Plc Company, Hilton Hospitality Inc., Hoare Govett ABN, Hoare Govett Services, Hogg Robinson Financial Services, Hq Global Workplaces Inc., Hsbc Bank Plc Uk), Hsbc Bank Usa, Hsh Nordbank, Hughes Electronics, HypoVereinsbank, Ibm Corporation, Icg Berane, Icicibank Ltd India, Imperial Energy Corporation, Inceptamarketintelligence, Information Brooker, Ing-group, Intellispace Inc., Intern Inst For Strategic Studies, International Finance Corporation, International Monetary Fund, Investment Technology Group, Japan Bank For Intern Cooperation, Japan Trade And Investment Ins, Johns Hopkins University , Jones Lang Lasalle, JPMorgand, Kazimir Partners Uk, Kbc Bankverzekeringsholding, Kbc Financial Products Uk , Kempen & Co, Keyhaven-capital-partners, Kinkos Inc., Kissingermclartyassociates, Knight-frank, Kpmg Moscow, Lazard Freres , Lehman Brothers , Liberty Business Advisors, Library Of Congress Information Service, Linebrook Ltd., London Business School, London School Of Economics, London Stock Exchange, Louis Dreyfus Corp., M-m-planet-retail, M. M. Warburg Bank, Marcus Millichap Real Estate, Mastercard International Llc , McKee Nelson, Mckinsey & Company Inc., Mcube Investments Technologies, Meinlbank_vienna, Mellon Bank, Merrill Lynch And Company Inc., Metro Ag Koeln, Microsoft Corp., Midas Fondsmaeglerselskab A/s, Mint capital, Mission Capital Advisors Llc., Mizuho Corporate Bank, Mks Inc., Mmdpr, Moore Capital Management Inc., Morgan Stanley Group Inc.,, Moscow Narodny Bank Limited, Muenchener Rueckversicherungs , Nasdaq Stock Market, Nat West Bank Group, Natexis Metals, Netscape Communications Corp, Network Of Associated Press, Network Of Ibm E-business Host, Nicholas Hall Co., Nikoil Ibg E-commerece, Nomura International Hong Kong, Nomura International Plc., Nomura Securities, Nordea, Northland Cable Television , NYSE, Oaktree Capital, Octagon Capital Corp., Ogilvy & Mather Inc., Oliver Wyman & Co, Omni Offices Inc., Onvista Media Gmbh, OPEC, OTP Bank Hungary, Overseas Private Investment Co., Oxford University, Pacific Crest Securities Inc., , Painewebber Group Inc., Pccw Limited, Peterhambro, Petra Holdings Llc., Pfc Energy, Piper & Marbury L.l.p., Polo Ralph Lauren L.p., Polymetall Uk, Precision Castparts Corp., Price Waterhouse, Pricewaterhause-coopers MOW, Princeton University, Quintiles Uk, RADIO FREE EUROPE, Raiffeisen Zentralbank, Raymond James Financial Inc., Real Estate Board Of New York, Regus Management Limited, Renova Management Ag., Rete Pubblica Della Banca Di Roma, Rogers Cable Inc. Bloor , Roland Berger Strategy Consulting, Rose Partnership, Rosemount Capital, Royal Bank Of Canada, Royal Bank Of Scotland, Royal Institute Of Naval Architects, Rusal Hq , Sac Capital, Salomon Inc., Sandler O'Neill, Savannah College Of Art, Savv-allen-overy, Scansafe Inc., Scherer Investments Inc., Schweizerische Effekten-giro, Shanghai Commercial & SavBnk, Siemens Ag , Sita-societe Internationale De, Skadden Arps Slate Meagher & Flom, Spencer Stuart, St. Louis University, Standard Bank (asia) Ltd., Stanford University Network, State Bank Of India, Sterling Publishing Group Plc., Susquehanna Investment Group, Swedish Tax Administration, Swiss Federal Government, Swiss National Bank, T. Rowe Price International Inc., Tbih (rus), The Bank Of New York, The Chase Manhattan Bank, The Chase Manhattan Bank N.a., The Dow Chemical Company, The Economist, The George Washington University, The Mining Journal, The St. Louis Trust Company, The Supreme Court Of The Us, The World Bank Group, The World Bank Group, Thomas Murray Ltd., Thomson Financial, Thomson Information Services, Tufts University, Ubs Ag , Ubs-lon-pd, Unaxis Balzers Ag, Unicredito Italiano Spa, United Partners Tallinn, Unity Bank, University Of Houston, Us Courts – Dcn Colocation, Us Venture Partners, Valley National Bank, Vtx Services Sa, Wainwright Investment Counsel, Wakefern Food Corporation, Warsaw Stock Exchange, washingtonspeakers.com, Welch Capital Partners Llc, Westhouse-securities-llp, White and Case, Wiener Boerse Ag, Zwirn Capital Management

Russian Construction Sector – A Viable Investment Opportunity


Russian Construction Sector – A Viable Investment Opportunity

In my posts I repeatedly note that the Russian construction sector is a extremely attractive for investor community. Recent news reports confirm this. In fact today’s U.K. Independent produced a short overview “A global property boom Russian style” that describes what is going on in Russia. “The place to be for booming commercial property development right now is Moscow. According to international property analyst Knight Frank, new developments of high-grade office space in the Russian capital have doubled since 2003, with a further 1.5m square feet of space becoming available before 2011.” And it is true. Here are some latest developments that prove this idea.

The first Russian private equity fund to participate in development of infrastructure was formed. This week it was announced that Macquarie Bank (ASX:MBL) and Renaissance Capital established a joint venture, Macquarie Renaissance, to develop infrastructure advisory and fund management opportunities in Russia and other CIS countries. It is interesting that in the press-release “the 2014 Olympics in Sochi and beyond” perspectives are mentioned. Macquarie Renaissance is based in Moscow and has already a team of 10 dedicated finance professionals. According to press reports the JV projects will have at least $ 100-150 million start threshold.

London & Regional Properties, the British real estate developer announced that it plans to spend at least $1 billion on projects in Russia in the next 12 months. Very interesting obestervation is produced by the company: “Russian yields have always been higher than the rest of Europe, reflecting the perceived risks and low transparency that have traditionally deterred institutional capital. However, this year has already witnessed the successful London flotation of Russian developers such as Sistema-Hals, Mirland and AFI, and the creation of AIM-listed funds, including Metro Baltic Horizons. As more western capital flows east, the safer the market seems”. According to London & Regional Properties Russia may attract investment from foreign real estate companies worth $7 billion in 2007, up from $4 billion last year.

A Russian property development and management company R.G.I. International Limited (SEA:RGI) announced that Charlemagne Capital Ltd (SEA:CCAP), an independent investment management group acquired about 3% of its equity (at the cost of $37.5 million). RGI is involved in the development and management of high-end office, retail and residential properties in central Moscow and the surrounding areas. It is interesting to note that Morgan Stanley was the first investor to note RGI and acquired 15% of equity.

Deutsche Bank (FRA:DBK) continues its investments in Russian developer sector. Earlier it allocated $ 600 million to DekMos construction company for the project to reconstruct the Hotel Moskva (Moscow); established a JV with Austrian construction company Strabag AG (FRA:STB) that operates in Russia. At this time it was announced that DB has agreed to provide a 12 billion RUR (USD 472 million) loan to STT Group development company; the company itself announced its IPO plans.

ABSOLUTE-Development – a part of Absolute Group is planning IPO in 2008

For those who read Russian, I forward you to the Vedomosti Daily detailed analysis of the Russian developer sector.

Russia – a Key Element of Global Dow’s Strategy


Russia – a Key Element of Global Dow’s Strategy

The Dow Chemical Company (NYSE:DOW) is expanding its presence in Russia. The company operates in Russia since 1974 and according to some reports currently there about 90 people involved with support of its activities. While conducting business in Russia is somewhat risky, the Dow’s average annual growth rate (about 30%) is worth it. In January, the company started up its first ever production facility in Russia. The plant, located at Kryukovo, outside Moscow, will produce polystyrene insulation boards for Dow Building Solutions, one of Dow’s market-facing business units (this is nicely described in the Around Dow Newsletter). And back in August 2006 Dow had formed a JV - Dow Izolan, in the polyurethane systems business. The JV shall provide customer-tailored, polyurethane systems products when the big plant is scheduled to start its operations in Vladimir Oblast, 170 kms North of Moscow. The company cites Kostas Katsoglou, business president, Dow Building Solutions, "Our strategic aim is to establish Dow as an important and integral player in the building industry in Russia. This strategy is built upon our global expertise combined with a strong brand and in-depth product and application knowledge." Construction industry is booming in Russia and Dow is fitting nicely in the picture with its products.
Dow is evaluating further investment opportunities, in partnership with key domestic energy producers. In particular in 2006 Andrew Liveris, Dow’s President & CEO, met with top Gazprom (LON:GAZP) officials. The company notes in its 2006 10-K that both Gazprom and Dow are working “jointly on energy-related projects both inside Russia and elsewhere in Europe.” Now it seems that efforts had intensified and the next project would be construction of a petrochemical plant in Russia. Gazprom has been indicated as a possible partner in the plant construction. Dow representatives note that Russia currently produces less ethylene than any of Dow Chemical's plants around the world.

From investor point of view, some experts note that fact that Dow historically seems to take advantage on the “commodity cycles” and the company’s earnings plummeted during the end of these cycles. Thus, there is a good reason to believe that Dow shall be feeling pretty nice with implementation of its global strategy - JVs all over the world (Saudi Arabia, Brazil and now Russia).

Investing in Russian Gold Mining Companies


Investing in Russian Gold Mining Companies

While there is a lot of materials on the Internet about Russian gold mining industry and investments in it, here I would like to present a mini-case of a Russian company that is mulling IPO later this year on LSE (LON:LSE) AIM or TSX (TSE:X). Of course, this is not big one, but shows a potential of investments that was actually well captured by Renaissance pre-IPO Fund that already made it. (BTW a nice news item was posted today at RBC Daily about the Fund).
Golden League Limited was founded in the summer of 2006 by the former CEO of Highland Gold Mining (SEA:HGM), for the purpose of exploration and development of gold deposits in Khabarovsk Region. The current management is former Highland Mining employees and among the shareholders is Flemings Family & Partners. The Company is currently developing the gold project, which consist of a 4.8 sq km gold deposit and the surrounding ore field (348.2 sq km), located 610 km east of Khabarovsk.

Renaissance pre-IPO Fund invested $5 mln and became the largest financial investor. The purchase price implies the company valuation of 4 x EV/EBITDA 2008
The current round of financing will be used to finalize the payment for the company, which acquired a new license ($1.5 mln) and is continuing exploration work on the edge of the old and new license plots. Another round of financing will be needed to continue the exploration of a new plot and to conduct a feasibility study for a factory. However, if the result of the reclassification is not sufficient to reach the target capitalization for the IPO, shareholders may choose to raise private funds and postpone the IPO for one more year.

The Company has identified a “market niche,” exploring quality, lesser-known deposits that are available for acquisition. Once acquired, the Company’s team has the experience necessary to plan and execute phased exploration programs designed to economically evaluate the full geological potential of each project

Source: Renaissance pre-IPO Fund

Banking Spree in Russia – At Full Swing


Banking Spree in Russia – At Full Swing

In my earlier post this month I mentioned that there is a definite indication of desire of foreign banks in M&A activity here in Russia. It seems that July is very active month in this. Today Vedomosti Daily published a commentary regarding acquisition of Russian and Ukrainian banks by foreign entities. This is based on the study of Dresdner Kleinwort showing that in the Ukraine foreign entities own about 47% of national assets, while in Russia this number is 10%. Here is a part of the table from the publication that represent the Russian side:
Russian Bank
(Equity Per Cent)
Transaction Value/
Valuation of the Bank
Capital Multiplier
Delta Credit (100%)
Rosbank (50%+1)
Orgresbank (75%)
Promsvyazbank (15.3%)
Average multiplier 3.5

Also some hot news of this week:
  • The British direct investment fund Aurora Russia has completed the second stage of the purchase of a stake in Unistream Bank, a subsidiary of Uniastrum Bank that specializes in money transfers. During the first stage of the purchase in April 2007, Aurora Russia acquired a 17.7% stake in Unistream for $13.6 million, After receiving permission from the Central Bank of Russia to acquire more than 20% of the bank, the fund acquired another 8.3% interest in the bank for $6.3 million. Uniastrum Bank was Russia's 48th largest bank by assets at the end of the first quarter of 2007, according to the Interfax-100 ranking.
  • Firebird investment fund acquired 10% of small Russian SOTSGORBANK through a Cyprus-based subsidiary. 10% were sold for about $10M. As of Q1 2007 SOTSGORBANK was placed as to its assets at No.167 in RosBuisnessConsulting rating of the banks. Firebird Investment already owns equity in Russian regional banks: 8.7% of Center-invest Bank, 10% of SDM-BANK and 10% of NBD-Bank.
  • KBC Group (EBR:KBC) formally closed the transaction of acquisition of Absolut Bank at the end of last week with the finale stake of 95% (after buying 7.5% from IFC)
  • IFC is buying additional equity issue ($ 184.99 M) of MDM Bank