Finance News

The Russian IPO market will reach a record volume of $32 bn

According to analysts of Alfa-Bank, the Russian IPO and SPO market will, at year-end, reach a record volume of $32 bn, with nearly 40 placements ranging from $29 bn to $54 bn expected in 2008.

Among the investors are: banks, metallurgical, electric power and real estate companies. In 2007, as in previous periods, investors focused on larger deals. The average volume of IPO and SPO deals was $1.3 bn, taking into account the large placements by VTB and Sberbank, or $526 mln without them, with similar figures in the emerging markets (not including Russia) being a mere $150 mln.

Placements by small and mid-size companies in the second half of 2007 proved to be successful, in spite of the liquidity crisis. In August-December, 12 companies offered $6.4 bn, with an average deal volume of $533 mln. It was not only the external market factor that contributed to the success of IPOs, but also the investor-friendly parameters of placements.

The proportion of offerings changed to the advantage of the Russian trading floor. If in 2005 94% of placements by Russian companies took place in the West, in 2007 52 percent of them were in Russia. IPO/SPO second market liquidity is drifting towards the Russian market.

The sector structure of placements also changed, the large-scale offerings by non-primary companies resulted in a decreased volume of liquid shares in the oil-and-gas sector from 68 percent at the end of 2006, to 55 percent in November 2007. In 2007, IPO/SPOs in banking and retail covered 68 percent of placements.

The earning capacity of securities issued in 2007 is far above the RTS yield index. Of the 30 primary and follow-on offerings in 2007, half of them (including VTB Bank) were traded below the initial price (maximum discount - 56 percent), with all others sold to the highest bidders (maximum growth - 75 percent).

Source: Alfa-Bank
Date: 04.01.2008 [ID: 158]

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