OREANDA-NEWS. April 13, 2007. In 2006 Russian companies raised over $17 billion, and other CIS companies raised over $4 billion, by listing their shares in Moscow, London, New York, Frankfurt, Almaty and Warsaw.Rosneft's record-breaking flotation on 14 July 2006 was a milestone in the history of Russian IPOs. The company raised $10.4 billion in Moscow and London, more than all Russian companies combined in 2005.

"Rosneft obviously had a very strong backer in the form of the Russian State -- unwilling to tolerate anything but success," said Tom Blackwell, Senior Vice President and Managing Director of PBN Moscow. "Still, the sheer scale of Rosneft's listing represented a breakthrough for Russian capital markets and re-opened the 2006 IPO floodgates after a surprisingly slow start to the year."  "If 2005 was the 'Year of the Russian IPO', then 2006 should be named 'Year of the CIS IPO'," said PBN's Chairman & CEO Peter Necarsulmer. Last year saw capital markets debuts of companies from Kazakhstan, Ukraine and Georgia. "This, combined with another strong showing by Russian corporates, has left investors with a Chinese menu of sectoral and geographic choices."

Whereas 2005 was characterised by an influx of consumer goods companies coming to market, by the end of 2006 it was all about sectoral diversity, with Russian and CIS IPOs ranging from telecoms and media (2), food and agriculture (4), metals and mining (7), property and development (3), pharmaceuticals (1), energy (7), retail (1) and financial services (4).

"Kazakhmys, the largest copper producer in Kazakhstan, became the darling of the London stock market in 2006," said Blackwell. "Since its October 2005 IPO on the LSE, in which it raised pounds Sterling 661 million, Kazakhmys' shares have nearly doubled in value, putting it at the head of the entire CIS IPO field in terms of value gained and making it the first CIS company to join the ranks of the FTSE 100."

London again hosted more CIS IPOs than any other market. However, in a shift from the previous year when 82% of companies from the region listed in London, only 62.5% of companies chose to list in London in 2006. This decrease was made possible by a marked rise in the capacity and profile of domestic stock markets, particularly in Russia.

"Even putting Rosneft aside, companies like Magnit, Raspadskaya and OGK-5 -- each of which raised more than $300 million locally -- helped to defy the conventional wisdom that you have to go abroad to access serious funds," said PBN's Vice President for Financial Communications, Artem Dovlatov. "It's not surprising that an increasing number of leading investment bankers are talking about Moscow becoming the second most influential financial centre in Europe after London."

In 2006, Russian companies that pursued domestic-only listings raised over $1.5 billion, compared to just $294 million in 2005. And with Sberbank off the mark in 2007, attracting close to $9 billion locally, 2007 will be another record-setting year for leading Russian exchanges RTS and MICEX.

"Wherever they chose to list, the increase in the number of publicly traded companies from the region has allowed investors to adopt a more nuanced assessment of CIS offerings, along with a more stringent vetting of companies headed to the equities market," said Trevor Barton, Senior Vice President & Managing Director of PBN London. "Having said that, the Rosneft IPO showed that even today investors can be willing to turn a blind eye to governance and legal niceties if the offering is compelling enough."

Current forecasts for 2007 are even more bullish than they were for 2006. "There is no evidence to support the previously held view that the IPO market will taper off in the run up to Parliamentary and Presidential elections in Russia," Necarsulmer continued. A recent Renaissance Capitalreport predicted 43 IPOs by Russian companies, raising a combined $31.24 billion. "Add to the mix companies from Kazakhstan, Ukraine and other CIScountries, and you can see that this region will play an increasingly dominant role in the global equity markets in years to come."