The attention of major western investment funds has been focused on the RosBusinessConsulting (RBC) holding company. An additional issue of its shares yesterday was bought by such large funds as Pioneer, J.P. Morgan and East Capital. Experts link this activity of the funds to their willingness to invest in Russia’s dynamic IT and media businesses and the fact that RBC has no competitors on the stock market.

In April 2002, RBC conducted the first initial public offering (IPO) of shares in Russia. Having placed 16 percent of its shares on the RTS and MICEX, the company obtained $13.28m. RBC’s sales volume reached $48.5m in 2003, of which media business revenues made up 55 percent, and the corresponding figures for IT business and RBC’s new project of business television channel were 33 percent and 12 percent respectively. At present, the free float makes up 23 percent of RBC’s shares, and the top managers hold the rest of the shares. RBC’s capitalization reached $200m at the closing on MICEX yesterday.

RBC reported that the holding company had placed 11.16 percent of the authorized capital yesterday at a price of $1.9 per share, having received $21.2m. Over 45 days RBC plans to place another 3.84 percent of the shares among its earlier shareholders. German Kaplun, the chairman of RBC’s Board of Directors, has declared that the holding company would buy assets, but he did not specify what assets would be acquired.

Judging from the results of the offering, the interest of western funds to Russia’s only public media company is enormous. According to Khalid Dianov, the chief of the Department of Corporate Finances of ATON, the demand has exceeded the supply. ATON sold over half of the issue of RBC’s shares to both individual and institutional investors from Russia and other countries. A source close to the deals told Vedomosti that the German fund Union Investment had bought about 27 percent of the new issue, and the Italian fund Pioneer had acquired 13.4 percent of the new issue. J.P. Morgan, East Capital and other funds have also become shareholders in RBC. The international fund Templeton bought shares in RBC earlier.

Investors give the same explanations for their interest in RBC’s shares: the Russian stock market is very narrow, and one should use every chance to diversify one’s investment portfolio. “This is a diversification of our portfolio, as we have been diverting ourselves from the oil and gas industries and the energy sector, Irina Krivosheyeva, the general director of Deutsche Investment Trust, which bought RBC’s shares for its unit investment trusts and clients, pointed out. She hopes this acquisition will be successful, “as this sector is developing dynamically.”

Aivaras Abromavicius, a fund manager of the Swedish company East Capital, has declared that the trusts have bought 1m shares in RBC during the IPO two years ago. He is satisfied with the company’s profitability, and he views RBC’s growth potential as “enormous,” as the company owns Russia’s only business television channel, and TV advertising rates in Eastern Europe are rising rapidly. J.P. Morgan declined to comment on the acquisition.

Kirill Dmitriyev, the managing director of Delta Capital Management, which holds blocks of shares in such TV channels as STS and TV-3 and the IT company Compulink agrees that RBC is operating “on an interesting combination of markets, which are growing rapidly.” He confirmed that the rapt interest in RBC was due to the absence of similar Russian companies whose shares would be traded on the stock market. According to him, the Russian IT market is growing by 27 percent a year, and it is equal to one third of the market of Eastern Europe; the market of TV advertisements had grown from $400m in 2000 to $1.4bn in 2003.

At the same time Arsen Revazov, the president of the IMHO VI advertising agency, is surprised at RBC’s results. For example, Revazov estimates that the Internet advertising revenue of $15m, which the company declared for 2003, is practically equal to the total volume of the Russian Internet advertising market (not exceeding $30m). However, there are other large participants on this market, such as the Yandex, Mail.ru and Rambler Internet portals. “Therefore, RBC controls not more than 25 percent of the market, totaling not more than $7.5m,” Revazov concluded. Ivan Zasursky, the deputy general director of the Rambler holding company, which owns the portal of the same name, estimates the Internet advertising market at $15m-19m.

In response to this, RBC General Director Yury Rovensky points out that there are different methods of estimating the Internet advertising market volume: his company controls over half of this market, and he considers understated its estimated volume of $30m. Hence the figure of over $15m in advertising revenues.

However, stock market analysts are not confused by these disagreements, and they predict a great future for RBC. “Amid the oil scandals, funds have chosen to move to a calmer sector. RBC’s shares are a good acquisition, and they may grow by 30 percent before the end of the year,” Natalya Zagvozdina, an analyst for Renaissance Capital, remarked. Svetlana Vitkovskaya