Tue. Oct 19th, 2021

Russian business and finance updates

Vladimir Yevtushenkov enjoys a new life. A few years ago, after a battle with the state oil group Rosneft could jeopardize its Sistema conglomerate, the 72-year-old Russian tycoon is now taking the lead in a boom in the country’s dormant stock markets.

Sistema, whose biggest asset is the largest telecommunications group in Russia, is looking for companies from the agricultural producer Steppe and the health clinic Medsi to the pharmaceutical group Binnopharm Group, one of the main producers of the Russian Sputnik V Covid-19 vaccine, and the bank of MTS.

The group’s recent success with other initial public offerings appears to have confirmed Yevtushenkov’s decision to reaffirm its commitment to technological investment following the state’s 2014 seizure of its controlling stake in oil producer Bashneft.

Ozone, a e-commerce site owned by Sistema, has doubled in value since it was published last year, while papermaker Segezha’s revenue rose 45% year-on-year in its most recent quarter to its own stock market.

Meanwhile, MTS, Sistema’s crown jewel, is taking part in a race to create a technology-based ‘ecosystem’ that offers customers everything from financial services to streaming entertainment.

“We have lived before. . . ideals of independence and on our own funds. “We were not an investment company,” Yevtushenkov told the Financial Times. “Now people understand that we are not losing our own money and that we will not lose other people.”

Although many of Sistema’s technical investments are still years away from profit, Yevtushenko said it is in balance with the traditional assets in its portfolio. “We are not worried. If we destroy something with Ozone, another enterprise will penetrate us. Our strength is that we are diversified. ”

Sistema is investing with state-owned banks today and is attracting further funding for its venture capital as it looks to future IPOs made possible in part by a recent increase in Russian retail investors.

“The market is very volatile, bank deposit rates are close to zero, inflation is pretty serious,” Yevtushenkov said. ‘People are therefore looking for security when buying and selling shares, because if you guess right, it gives a lot more income than keeping their money in a bank. It’s like a drug. You become addicted and you can not stop. ”

Yevtushenkov, a former Soviet factory engineer, began trading in oil and computers with colleagues from the Moscow mayor’s office at the beginning of Russia’s capitalist era. He was close to Moscow’s then-mayor Yuri Luzhkov for years, though the two men dropped out in 2004.

Unlike many oligarchs, Yevtushenkov has won praise from investors for his commitment to public markets and corporate governance, rarities in a country where boards are often ceremonial, and shareholders paying themselves sky-high dividends.

Sistema is the largest diversified diversified holding company in Russia. Last year, it made Detsky Mir, a retailer of children’s goods, the first Russian company to own 100%, although an investor has since built up a 30% stake.

Other oligarchs see Yevtushenkov as a belligerent for the business community in Russia, which has been stagnant for years with economic growth and declining purchasing power of consumers.

Calls for reform largely fell on deaf ears when the Kremlin increased state control over the economy and sought to reduce companies’ dependence on Western financing following US and EU sanctions over the annexation of Crimea in 2014.

Yevtushenkov spent several months under house arrest that year on charges of Bashneft’s illegal privatization, which were later dropped. After a protracted legal battle and the intervention of President Vladimir Putin, Sistema agreed in 2017 to pay Rosneft, who had bought Bashneft from the state a year earlier, $ 1.7 billion in damages for alleged deprivation of assets.

Largely as a result of the Bashneft agreement, the conglomerate has a debt of about Rbs210 billion ($ 2.9 billion), a burden that, according to Yevtushenkov Sistema, has prevented it from investing in its business.

The issue of reinvestment of businesses has become particularly pressing this year in Russia after Putin criticized companies for taking record dividends like ordinary people suffered during the pandemic. As prices for staple foods such as grain rose – of which Steppe is one of Russia’s largest producers – Prime Minister Mikhail Mishustin blamed the rise on businessmen’s “greed”.

The sharp comments caused a chill in the Russian business community. More than three-quarters of business owners fear unfounded criminal prosecution, according to a survey conducted by the presidential security service in May.

“We have always done what the president said,” Yevtushenkov said of Putin’s remarks. “We paid virtually no dividends, because the business always needed money.”

U.S. investor Michael Calvey, whose Baring Vostok private equity fund co-owns Ozone with Sistema, was given a six-year suspended sentence last month for embezzlement. The case against Calvey is widely seen as a sign of how Russia’s investment climate has a back seat in the priorities of the security services.

Yevtushenkov suggested that the legal problems were part of doing business in Russia. “I’m going to be honest with you – I could have stopped investing. But I survived. I think Calvey is a tough guy. “He will survive and continue to invest,” he said.

Yevtushenkov, who sees things as a ‘minefield’, made peace by playing by the state’s rules.

‘The state has the right to make decisions that the company likes or not. . . There can be some unpleasant consequences for someone – it was for us. But this is life, ”he said. ‘Businesses must work for the good of the state. As soon as it is lost sight of, something unpleasant always happens. ”

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