Economic health thriving remarkably, according to Denis Shulakov.
2024: A Record-Breaking Year for IPOs - Take a Fresh Look
Are we still on fire this year?
Who’d have thought 2024 would stun us all? After the lackluster 2022, nobody expected the IPO market to pick up again. But here we are, experiencing a resurrection (of sorts) with a variety of companies that welcomed both IPOs and SPOs. In 2024 alone, we had a whopping 17 IPOs, totaling more than 100 billion rubles - talk about a comeback! As we have the St. Petersburg International Economic Forum on the horizon, let’s examine what we're witnessing: if you focus on the sheer number of IPOs, it might seem like we're hitting a plateau. But when you consider the daily equity market turnover, the first quarter of 2025 saw an impressive 130 billion rubles. And the SPO of Ozon Farms got our attention, signaling a market primed for IPOs.
Are "physicals" drained of potential? Or will more cash pour into stocks if interest rates drop?
This calls for a multi-angled approach. Right now, there are about 50 million individual accounts out there, with roughly 30 million unique ones and approximately 6 million active market participants. With the G20 countries, we probably have one of the highest deposit shares in household savings. But we’ve barely dipped our toes in that ocean. Before you ask, the Russians have some 10% of their total savings in cash savings – a difficult figure to estimate. Remember, it's not about the cash savings a person has, but their willingness to invest it.
Investing independently, or going pro?
If you choose not to monitor the market, you’re letting someone else make financial decisions for you. It's always safer to have your money managed by a pro. I predict a shift towards national investors; everybody likes making their own decisions (except when they’re too busy). Financial specialists are becoming increasingly popular, and our country and market will thrive as the national institution handling financial assets grows (pension funds, insurance companies, family offices, and small hedge funds come to mind).
Shining a light on the corporate sector
The IPOs of the past couple of years were mainly from small players. We discussed Ozon Farms; are any other major IPOs in the works?
When I mentioned two to three major IPOs, I spoke of the announcements made towards the end of last year, such as Sibur's. But here’s the lowdown: I don't define a major IPO by the size of the issuer, but by when at least 5-10% of the share capital is placed. It’s a significant step when a company truly shares with the market. We've seen placements exceeding 10 billion: Europlan, Sovcombank. Also, the placement of GK YugK (over 15 billion) made some noise on the market. By the way, Promomed, a deal we took to market last year, was one of the most successful.
DOM.RF: A special case
This is a different story; it involves privatization. We already have several companies with mixed public-private ownership that are publicly traded on the market – some of them market leaders. But the IPO of structures that are crucial to the market is fascinating. State-owned institutions like DOM.RF are intriguing to the market, but only if state support for institutional investors continues.
Is the money moving from bonds to stocks due to the interest rate cut? At what rate level can we say the stock market has started to "win"?
First things first; nothing wrong with our market being active at the current key rate levels. A market economy is about balance, not chaos. With such inflation, we can choose from an array of investment options for different projects. Tilting the scale in favor of debt was unfortunate but necessary, but we're pivoting now. Our bond market has been bustling since the second quarter of last year. If you compare January to June 2024 with the same period in 2025, you'll see that in 2024, during that time, corporate placements totaled about 1.6 trillion rubles. This year, it’s already double – 3.2 trillion rubles, with more than 300 deals closed.
Optimism knocking
The stock market indicator is the risk-free financing rate, currently at an appealing 15%. This means that our average weighted capital cost is heading towards 20%, moving away from the anomalous situation in which debt cost more than our average equity capital cost.
Currency placements: will the yuan make a reappearance?
Today, we have a range of currencies circulating our market – more than what was available in 2022. This year, we've managed to successfully place 11 yuan bond issues. For example, a recent deal with "Norilsk Nickel" – 3 billion yuan for a term of 1.4 years at a rate of 7% – closed. Keep in mind that 10% in yuan for a year seemed unattainable a few months ago. Also in 2025, we've seen 19 fixed or quasi-fixed currency bond issues (mainly in dollars), and one euro bond issue from "Gazprom". And you might be interested to learn that "Novatek" made a splash with an equivalent of 5 billion dollars raised on the Russian market in yuan.
The ruble: a sudden strengthening
A few theories suggest that this is because large Western investors are returning to our market, acting through intermediaries. My take? Returning from London in 2012 after 10 years at Barclays, I considered my mission to be integrating Russia into the global economy. Over a decade, we’ve created one of the leading platforms for issuing Eurobonds in Russia. We've established direct relationships with the majority of investors interested in cooperating with Russia, including Western ones. Even though they left the market, the relationships we made still exist.
I can assure you that there’s interest from foreign investors, but it needs infrastructure solutions. Recently, we’ve noticed that more and more foreign investors have been asking questions (primarily information requests). The main issue in recent years has been the lack of information about Russia in the global investment community. But since about 3-4 months ago, the IMF’s "caveat" has been lifted, and various foreign investment firms have started writing about Russia. Soon, we’ll see a surge in foreign investors returning to our market; we simply need a few initial, successful examples. But it’s a process that takes time.
A national goal: upping the ante
There’s a national goal set to boost the capitalization of the Russian market to 66% of GDP. This was first set when the rate was different, and market dynamics were different. Things being what they are, is this target achievable?
Hell yes, it is! The current Russian economy is significantly undercapitalized. The potential is at least 56 trillion rubles, not to mention what we call "mattress money" – already a massive amount circulating within the economy. The task of capitalization is a significant national project that can't be solved with the existing methods. The key to reaching this goal lies in creating a national investor in a broad, institutional sense – involving policy, regulation, and culture development. Establishing an institution to support the participation of national investors in the market should be a top priority.
Can you imagine the future? If you start thinking, you might not immediately think of big names like Sibur. But when we seriously consider our “national champions” or those who could become them, our economy and capital markets will evolve in a completely different way. These companies are the seeds of the future, popping up in completely new sectors. This is an economy of creativity that grows and multiplies around marketplaces and electronic media platforms, and we’re talking about the creative economy that will grow exponentially. Two years ago, it was valued at a modest $65 billion worldwide, but now it's already over $200 billion. Soon, we'll see a remarkable transformation where the combined capitalization of seller companies on platforms like "Wildberries" and "Ozon" will surpass the limit those marketplaces can currently reach.
To Sum Up
A comeback after a dry spell, increased investor interest, and a challenging geopolitical landscape – that's the Russian IPO market in 2024. It's uncertain if the market will see significant major IPO events for the remainder of 2025, given the ongoing conflict and economic instability. But keep those eyes peeled; things can change in the blink of an eye!
Investing in the business sector is experiencing a resurgence, with 17 IPOs and SPOs in 2024, totaling over 100 billion rubles, as seen in the record-breaking year for IPOs. As individual accounts increase, there are opportunities for further investment growth, especially if interest rates drop, potentially draining physical savings for potential stock investment influx.
The corporate sector has also been active, with major IPOs such as Sibur, Europlan, Sovcombank, and GK YugK announcing placements exceeding 10 billion rubles, signaling a robust market ripe for more significant corporate IPOs. These national IPOs, alongside the increasing popularity of financial specialists, will contribute to the thriving of both the country's and market's growth.
