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3 Feb, 2010 15:04

Russia’s IPO market shows growth after one-year lull

Dozens of Russian companies are lining up to raise more than $10 billion in IPOs this year, but the issuers should hurry up to go public, as the favorable conditions may soon end.

After an almost complete silence in the Russian IPO market in 2009, this year they are in demand. Now that the worst is over and debts have to be paid, a public offering is a viable way to raise much needed cash, but none of this will work without the prospect of reward for risk. Jon Edwards, senior manager at the London Stock Exchange, notices that Russia’s IPO market has so far shown good profitability.

“The opportunity is still there in every sector you can possibly name. The margins that many of the Russian potential essential issuers are generating – whether it be food retail, restaurants, packaging – are so much higher in many cases than those of their western counterparts, because the market is still at a very early stage of development.”

The year got off to a flying start, with the $2 billion listing of Rusal in Hong Kong and other miners including SUEK and Metalloinvest likely to follow in its footsteps. Moreover, Viktor Shvets from Emerging Market Research Department of Nomura investment bank says that even if the country’s economy doesn’t perform well, the equity market could still boom.

“People usually say if the country has challenges, the equity market has challenges, but that doesn’t always work like that. We do say that Russia’s equity market has a capacity to appreciate up to 30% in the next six-to-nine months. Because what goes in the equity markets valuation are not just prospects for Russia, but also prospects for specific companies.”

However, stock market executives say that companies wishing to go public would be well advised to do so quickly. They warn that, as governments around the world withdraw stimulus packages, the liquidity in the markets could start to dry up, making it harder to get an IPO successfully off the ground.