Translated material
Under depositary receipt
Oleg Vyugin will replenish the Russian market with companies from the CIS and Canada
In April-May, a bill will finally be submitted to the State Duma allowing foreign companies to issue Russian depositary receipts (RDRs) for their shares. This was stated by the head of the Federal Financial Markets Service Oleg Vyugin, who yesterday discussed with deputies the problems of regulating initial public offerings (IPOs) in Russia. Market participants, who have long been waiting for the appearance of RDRs, believe that this instrument will be in demand by issuers from the Commonwealth countries, primarily Ukrainian and Kazakh, and are already calculating how much the capitalization of the Russian stock market will increase due to depositary receipts.According to the director of the analytical department of Antanta Capital Investment Company Denis Matafonov, the securities of about 150 issuers are currently traded in Ukraine - this is a quarter of the Russian stock market. “Companies need to raise funds, so they benefit from working in the Russian market, whose capitalization is approaching a trillion dollars,” he says. -- In addition, do not forget that listing in Russia is much cheaper than in London or the USA. This will also be interesting for Russian investors, who will have more opportunities to invest their funds.” As Deputy General Director of the MICEX Stock Exchange Gennady Margolit noted yesterday, the issuer's irreducible costs when conducting an IPO on Russian stock exchanges will amount to $23.5 thousand, while when placing on Western sites - $240-410 thousand.
True, Alexey Zakharov, an analyst at the Trust investment bank, disagrees with this opinion. In his opinion, RDRs will not be in very high demand among issuing companies from the CIS countries: “In Kazakhstan, they deliberately do not develop a national stock market, because initially the issuers were oriented towards the West. And recently several Kazakh companies held IPOs in London.”
Mr. Vyugin mentioned yesterday that the first to show interest in RDR were Canadian gold mining companies, which have many assets in Russia. Most likely, we are talking about the company Barrick Gold, which has a license to develop deposits in Lyubavinskaya in the Chita region, as well as Bema Gold, which is developing the Kupol deposit in Chukotka. “These companies are now trading in London and Canada,” says Mr. Matafonov. “I think that the appearance of depositary receipts for these shares in Russia would be greeted with great enthusiasm by our investors.”
However, despite the constant complaints of Mr. Vyugin’s department against some Russian companies that prefer to bypass the law to conduct placements entirely abroad, the majority of issuers are placed and traded in Russia. As the head of the Federal Financial Markets Service said yesterday, now up to 70% of the volume of trading in shares of Russian issuers occurs on Russian exchanges, and only about 30% on foreign ones. According to a recently published report by the international auditing company Ernst & Young, last year Russian issuers conducted 11 IPOs with a total volume of $4.9 billion, which is four times more than a year earlier. According to Mr. Vyugin, this ratio indicates a fairly high level of market liquidity and that Russian issuers could successfully conduct initial placements within Russia. Professional market participants share the same opinion: “According to the new rules for conducting IPOs, which came into force in December last year, a third of the placement should be carried out in Russia. Thus, Rosneft, planning to raise $20 billion, will have to place shares in Russia worth about $7 billion. I think that the market will “digest” this volume without any problems,” says Mr. Zakharov. In addition, as you know, two banks are planning to hold an IPO this year - Rosbank and VTB. True, the rules according to which a third of the issue must be placed in Russia do not apply to banks - in particular, their IPOs must be registered with the Central Bank.
At the same time, the head of the Federal Financial Markets Service admits that for Western investors, working on Russian sites is still not very convenient and requires additional costs for registering property rights in the register, since foreigners do not want to take on brokerage risks. However, according to Mr. Vyugin, the creation of a central depository can remove risks, including for foreign investors, but when it will appear is still unknown.
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The Federal Financial Markets Service will develop a draft presidential decree in the fall on the creation of a mega-regulator - a single body supervising the financial market, Mr. Vyugin said yesterday. According to him, this body should be collegial. As you know, the idea of creating a mega-regulator belongs to the Federal Financial Markets Service and is spelled out in the financial market development strategy, which was generally approved by the government in February of this year.