Equity issue lessons from the Rusal IPO path

With Russian companies again becoming a player in the global IPO scene, Business RT spoke with Oleg Mukhamedshin, Director for Capital Markets at Rusal, about the effects for Russia and the factors determining success.

RT:How important is it for large Russian organizations to have exposure to the global investment community?

OM:“Well of course that is important because we are talking about the large corporates, sometimes the leaders, like Rusal, for example, which is the largest aluminium company in the world.And of course, in order to be competitive, in order to have an access to the world’s largest financial markets, you need to have the structure of shareholders pretty much the same as their peers – so, the global investors, institutional investors, are located all around the world.”

RT:What are the attractions of listing internationally as opposed to domestically?

OM:“Well, I mean, there is an obvious interest from the Russian investors.The financial market in Russia is growing, but it is still much less than the developed financial markets in the world.Of course the amount of assets under management in Russia is not as significant as in typical financial centres, like US, Europe, and Asia.”

RT:What does listing imply for an organization in terms of transparency, corporate governance, and investor relations?Does this involve a significant culture change for some Russian companies?

OM:“I think it requires certain changes, of course, because the international corporate governance standards are established for quite a long time, and you need to comply with those requirements.You need to make a lot of disclosures, you need to make your business, your financial figures, completely transparent for the company, to your investors.You need to explain your strategy, you need to meet with your investors quite regularly, quite often, so basically we are almost every month on the road meeting with different investors – either in America, Europe, Asia, Australia, Canada is a very interesting market as well.”

RT:How vital is it that companies undertaking an IPO or SPO conduct an effective roadshow?

OM:“Well I think the effective roadshow is the key.Most investors cannot rely only on the analysts research or just an overall understanding of the company. So all the investors making their own decisions obviously based on the one on one meetings with the management, raise questions to understand how management is capable etc.Of course the organized professional roadshow is a key for success.”

RT:How strong is interest in Russian equity placements? Is it increasing? What are the key factors in determining the interest in Russian equities?

OM:“Russian equity market is always quite an interesting opportunity for global investors, because clearly the global economic growth is currently mostly driven by BRICS countries.Clearly China is the largest among them.And commodity sectors, commodity, resources companies are quite interesting for investors.You see the largest IPO’s done recently they are all coming from natural resources, including the forthcoming Glencore IPO, which is going to be the largest in the history of the London Stock Exchange for example.So, of course, Russia is one of the markets which investors are very much focused on.And I am not talking about the emerging market investors, the Russian focused investors, but also the global commodity investors, global investment funds, dealing with natural resource companies.And you can see a lot of new demand coming from those markets which you didn’t see before – Australia for example, Asia, Hong Kong, mainland China.”

RT:For corporate Russia how important is it that more companies are listed and that Russian equities are more liquid?

OM:“I think for Russian companies, liquidity is quite important.Because of course the big investors can only invest when you have enough liquidity in the market.So there are a number of ways to increase liquidity – you can sell more shares in the market, you can do an SPO, or you can increase liquidity through being presented in different markets, just to increase your investor base.So Rusal is currently available – our stock is available in Hong Kong, depository receipts are listed in Paris, Euronext stock exchange, and also in Moscow, through the first ever issued Russian depository receipts.So this is one of the instruments how to improve your liquidity, and how to increase the interest from different investor groups.”

RT:How do you assess your recent IPO in Hong Kong?

OM:“Well, generally, of course it was successful.Because we had quite a significant oversubscription, we reached the targeted price of shares, we got quite a diversified investor base, and actually we have improved significantly since the IPO.For example the first trading day, and todays trading price, the share performance is above 30%.And also Rusal is currently the 22nd largest company listed in Hong Kong by market capitalization, so quite ahead of Chalco, which is the second largest aluminium company in China.So it is a successful IPO and we think that more and more Russian companies are interested in this market.”

RT:Today, Moscow, Hong Kong, Paris.Do you have any plans to go further?

OM : “Well we are considering some other potentiallisting venues for the future.One of the ideas is to be present in North America but it is a bit early to give you any specific stock exchange.”

RT:But maybe some hint of timing? And why you are considering?

OM: “Again, we are visiting our investors globally, quite often, and we are trying to accommodate the demand.So if we see a lot of investors who cannot buy the shares listed in Hong Kong and interested in Rusal being traded in North America, for example, we should seriously consider it.There is no specific timing for that, and of course, certain homework and discussion with your investors.So if there is any positive development we will definitely announce it in the market.”