However, even retail firms will struggle to do IPOs given the current valuations and discount expectations, says Dennis Ludkovsky, chief executive of mobile phone retailer Svyaznoy – which is why he is looking for a private equity buyer rather than going ahead with IPO plans.
“Private equity is just more willing to look at the numbers – and we can show clear growth in Ebitda and sales,” Ludkovsky told IFR last week at Troika’s Russia Forum. Svyaznoy, which sells mobile phones and provides banking services at its outlets across 80 Russian cities, has revenues of Rbs29.6bn from H1 last year, very similar to key peer Euroset, which tried and failed to do an IPO last year.
Svyaznoy would look to sell 40% of its shares to a private equity buyer, and valued the company at between US$1.8bn and US$2.6bn late last year. Deutsche Bank and Raiffeisen Bank have been appointed to manage the deal. Ludkovsky said that an IPO could still come, but at a much later date – around 2014. Only if the company fails to find an outright buyer would it consider an IPO for later this year.
His remarks reflect a growing issue for Russian IPO hopefuls. The divide between issuer expectations and investor demands on price has only grown as Russian stocks continue to trade at a 25%–30% discount to other emerging market indices. The Euroset IPO folded last year on this very issue, and it remains to be seen if any other companies are willing to swallow a discount if and when the market re-opens later this year.
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