2011 Russian IPO surge underway

After $5 billion worth of new listings in 2010, Russian companies are expected to continue their market push into 2011 with four new London listings underway.

Pavel Dorodnikov, Head of Securities at Rye, Man & Gor Securities, says the closing months of 2010 were very favorable for Russian IPOs with this year expected to see more Russian companies coming to market.

“At the end of 2010 Russian companies such as Mail.ru, Transcontainer, O’Key have listed their securities on foreign stock exchange, most of them marked as successful. This year the tendency has continued with more and more companies announcing 2011 IPO plans. It is a rather positive sign for the market and an important strategic step forward for the companies which have never been listed. It is the right time as long as there is a high liquidity on the market and investment funds and management companies have spare money to invest.”

Four Russian industrial and mining companies are scheduled to debut on the London Stock Exchange within the next few weeks.

Among the first to announce IPO plans were leading Russian pump manufacturer, Hydraulic Machines & Systems (HMS), and iron and coking coal group, Koks, with both planning to attract $500 million, and Koks anticipating a market capitalization of about $2.6 billion. Chelyabinsk Tube Rolling Plant has set a price range between $3.5 to $4.6 per share and GDR and believes its market capitalization will come in between $2-2.7 billion.

HMS Group has set a price range for the offering between $9.25 to $12.00 per GDR, estimating absolute listing value between $437 million and $567 million.

Artem Molchanov, CEO of the HMS Group, said the decision to take part in a London IPO reflects favorable conditions and growing.

“The HMS Group currently benefits from leading market positions, advanced research and development capabilities and a well-established client base of blue chip customers in a range of sectors. We believe that the Offering will give us flexibility to build on the strength of the current business, including by making potential selective acquisitions. We look forward both to capturing the opportunities of the fast growing pump and modular equipment markets to grow our business in Russia and the CIS, and also to the new opportunities that being a listed company will bring. With our strong management team and R&D and manufacturing base we believe that the Company is extremely well positioned to continue our growth as a public company and deliver strong returns to shareholders".

Vladimir Savov, Head of Equity Research at Otkritie Bank, says new companies coming to market are likely to attract interest, with a window of opportunity before the state commences its privatization plans.

“This year started with good trends on the market with almost all indices up despite a traditional lack of activity during January-February. Russian companies will represent an important industrial sector which is not widely represented on foreign stock markets. The companies are taking advantage of a narrow window before the state steps in with its own capital raisings expected to raise $5-10 billion.”

Despite the focus on international listings RTS Chairman, Roman Goryunov, says domestic exchanges are also likely to see increased listing activity.

"We expect that the number of IPO this year will be significantly greater than in the past. Companies are at the final stage of preparation. There are more than 20 companies in a pipeline for IPO on Russian Stock exchange.”