Dow Jones Newswires, April 8, 2002

MOSCOW (Dow Jones)--The boyish smile from behind Yuri Rovensky's glasses possesses such innocent enthusiasm that you'd think the technology stock bubble never burst and the 1998 Russian financial crisis never happened. Even a closer look at Rovensky's OAO RBC Information Systems, which is slated to be Russia's first domestic initial public offering, doesn't rein in the optimism.

RBC is profitable - its operating and net margins last year were 48% and 37%, respectively. It is also debt-free, operates in markets that are either high growth or have potential to be so, and offers a chance for Russian portfolio investors to diversity out of energy stocks.

RBC plans to sell 16 million new shares at between 75 cents to 85 cents. Pricing is expected around April 17, followed by a listing on both of Moscow's stock exchanges. The offering is a landmark event for the Russian capital market, which after the scandals of voucher privatization and loans-for-shares in the 1990s, will finally see its first real IPO.

It's also a big test for lead manager ATON Capital and prospective investors - namely a growing Russian middle class and foreigner stock buyers who are willing to differentiate between a start-up tech company and an oligarch-run financial-industrial group. ATON is looking to place the shares equally between local and foreign investors to try to guarantee maximum liquidity.

Michael Hammond, a venture capitalist who is one of four external directors on RBC`s board, told Dow Jones Newswires he expects the pricing around 80-cent range, giving the company an initial valuation of $80 million. If convertible bondholders subsequently exercise their options to convert at a 10% discount to the IPO price, the free float will rise to 23%.

Since there is no such thing as a greenshoe option under Russian law, ATON also has the right to ask the current owners to offer another 2% for market-tending purposes. Given sufficient demand, the free float will probably total 25% and a share by year-end, Hammond said.

Unique Company It's difficult to find parallels anywhere for RBC. The company started life eight years ago as an online financial information service provider, and that business - both news and price quotes - still represented around 40% of revenues last year.

However, as Rovensky, the company's chief executive officer, said in an interview, future growth will probably come from businesses that RBC has leveraged off financial information - such as offshore programming, Internet advertising and maybe a business television service in the not-too-distant future. The board will decide on that project in the next couple of months.

"It's a very interesting company, and on the surface it's a great way for some of us who are heavily invested in oils to get a little bit of diversification," said one local fund manager.

A similar rationale recently underpinned demand for food and drink group Wimm-Bill-Dann, which listed American Depositary Receipts in New York. RBC, like Wimm-Bill-Dann, is a play on reform and growth in Russia overall.

Internet penetration, financial news, programming and advertising are all underdeveloped businesses in Russia, and they are set to blossom if the macroeconomic stability delivered by President Vladimir Putin's government can last.

Others note, a touch more cynically, that the whole Moscow investment community has a strong interest in making this issue a success. But the fundamentals of the company justify the risk, some argue. For instance, analysts at Alfa Bank estimate that free cash flow will more than treble to $12.8 million by 2006.

By Geoffrey T. Smith, Dow Jones Newswires; (+7 095) 974 8055;