Russian IPOs in question as Ukraine crisis slashes domestic market capitalization by $70bn – Reuters

MOSCOW, Jan 26 (Reuters) – Russia’s market capitalization has fallen by 5.5 trillion rubles ($69.6 billion) in just three months in a standoff between Russia and the West over Ukraine , casting doubt on the prospects for an IPO this year.

Russia saw a renaissance in IPOs last year, with companies raising $3.7 billion, a ten-year high, and bringing investment banks more than $100 million in fees, according to reports. data from Refinitiv.

With high dividend yields and high oil prices behind Russia’s economic rebound, at least 10 companies from commodities to financials and retail were looking to raise about $2 billion, officials said. bankers. Read more

But growing tensions between Russia and the West over Ukraine’s potential NATO membership have sparked a massive sell-off of Russian assets in recent weeks, pushing the ruble to a 14-month low and government bond yields soared despite strong economic fundamentals. Read more

The sell-off saw the capitalization of Russia’s main index, the ruble-denominated MOEX (.IMOEX), fall around 26% from its peak in October, according to data from the MOEX Group, closing the IPO window for the moment.

“We can forget about the spring window (IPO),” said Vladimir Tsuprov, chief investment officer at TKB Investment Partners in Russia, with nearly $7 billion in assets under management. “The market would need six to nine months to recover more or less… That means an autumn window (IPO) at best.”

The ruble remained under pressure on Wednesday but the Russian indices, the dollar RTS (.IRTS) and the ruble MOEX, tried to regain ground. Read more

“We had a few deals in the pipeline that we were looking to close just after the Russian holiday ended, but given the market turmoil, we had to postpone those deals,” said Alina Sychova, head of capital markets at Sova Capital. . .

“NEW ECONOMY” NAMES UNDER PRESSURE

The retail sector has been the surprising newcomer and has become the darling of investors, a shift from years of interest in the energy names that dominate the economy as citizens turn their attention to discounted products and online delivery amid the coronavirus pandemic.

As a result, Russia’s retail sector alone raised $2.2 billion in equity deals last year, according to Refinitiv. Food retailer Vkusvill was among a wave of consumer companies looking to tap into the equity market in 2022, Reuters sources say. Read more

But recent volatility has left big investors looking at blue chips as their best option, said Slava Smolyaninov, chief strategist at BCS Global Markets, because the risk is too high to consider anything other than household names.

“Why do they need to look any further for something that’s more expensive, that’s new to the market with no track record?” he said. “The market probably needs to be another 30% to 40% higher to price new stocks.”

Vkusvill said an IPO was still one of the possible strategic options for the company’s development, but it was too early to talk about concrete plans.

But for some, it’s time to buy.

“Extremely high commodity prices and the upcoming end of the central bank rate hike cycle are supportive for Russian assets,” said Sergey Dyudin, chief investment officer at VTB Capital Investment Management.

“After massive selling, Russian stocks and bonds look very attractive compared to their global counterparts.”

($1 = 79.0100 rubles)

Additional reporting by Andrey Ostroukh Writing by Katya Golubkova; Editing by Krishna Chandra Eluri, William Maclean

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