Vedomosti, No. 216(539), November 23, 2001

The First to come!
RosBusinessConsulting Floats Its Stocks

The Internet holding of RosBusinessConsulting (RBC) will be the first Russian company operating in the IT sector to place its stocks publicly. Two of Russia's major exchanges will begin trading RBC shares next year. If the holding trades them at a good price, it would encourage other hi-tech companies to list their stocks.

In 2000 the annual revenue of the Internet holding RBC was $8m, of which $2m came from subscription services provided by the RBC news agency. The holding received $3m in advertising revenues and the remaining $3m from programming orders, such as web site development, the integration of web sites with information systems, etc. All financial figures have been audited by KPMG. Audited statements for later periods are not available yet. RBC owns the following web sites: the Utro.ru newspaper, the Krovatka chat-room, Autonews, the PCHome computer store, the LBN banner exchange network as well as several news lines.

The RBC Board decided to list the holding's shares at two Russian exchanges - the RTS and MICEX in the 2nd quarter of 2002. Yesterday the company chose Ernst & Young as its financial consultant. And next Monday in Geneva, RBC is beginning its road show for European investors, whom the company sees as its potential investors.

Six weeks ago the company was reorganized from ZAO (closed joint-stock company) into OAO (open joint-stock company), and now, according to RBC General Director Yury Rovensky , the company is planning to issue additional stock and place from 10 to 15% of shares on the market. More share issues are also planned for the future, after which however, the current top managers will preserve a controlling stake.

RBC's market niche is quite peculiar. The company gained initial recognition as an agency providing news and financial information. A year and a half ago RBC began providing IT services as well. Presently, the media and IT branches have almost equal weight in the holding. "One of RBC's most important assets is its brand, which inspires trust," Mr. Rovensky said.

Alexander Bychkov, a senior manager at Ernst & Young, confirmed that his company would render consulting services to the RBC share issue. "To communicate with investors and discuss concrete proposals with them is not our responsibility. From all appearances, the company will handle these matters itself," he added.

"Probably, next year the market will become more favorable for hi-tech stocks. RBC's advantage is in being the first purely hi-tech and computer company, which has emerged on the stock market. Its disadvantage is a relatively small profit and, as a result, a small capitalization," said ATON analyst Steven Dashevsky. In his opinion, the total capitalization is unlikely to exceed $30 to 40m. Other experts value RBC several times less. RBC prefers not to make premature estimations.

However, analysts stress that the demand for shares in this segment of the Russian market has not been studied enough. "The most important fact is that investors want diversification. They want something more than just oil. It's easy for RBC, which offers new sectors to invest in," UFG analyst Ari Krel believes.

The analysts are common in their opinion that there are a certain number of other hi-tech companies in Russia, which are seriously preparing themselves for going public. All of them will watch how successful RBC's placing will be. However, Alexander Andreyev, an analyst at Brunswick UBS, warns that the stock market should be voluminous by definition. RBC alone can't provide a normal trading volume, which would be sufficient to attract foreign investors to the Russian hi-tech industry.

In April 2000, both MICEX and the RTS simultaneously announced about the creation of specialized sections to trade hi-tech shares. In order to attract issuers, they reduced requirements to the volume of capital, the number of stockholders, the geographical spread of clients and the presence of audited data. However, according to RTS public relations chief Olga Belobrovtseva, only one little-known company has taken advantage of this section so far. But RBC is going to float its shares on equal terms with others, i.e. without any privileges.

Pavel Nefyodov