Doubling the Capitalization of the Russian Stock Market by 2030: IPOs Averaging ₽1.28 Trillion Annually

By 2030, Russia has set an ambitious goal: to increase the market capitalization of its stock market to 66% of GDP (approximately ₽174 trillion), essentially doubling the current level. With GDP projected to be around ₽201 trillion in 2024, this indicates a substantial increase in capitalization from the current ~₽53–62 trillion (end of 2024 – beginning of 2025). Calculations by NAUFOR suggest that to achieve this target, the market needs to attract about ₽1.28 trillion annually through initial public offerings (IPOs). This totals over ₽8 trillion from 2025 to 2030. In contrast, the volume of IPOs in 2024 was only ₽81.6 billion, while in the successful year of 2021 it reached ₽247 billion. The proposed annual IPO target of ₽1.28 trillion exceeds actual placement volumes by 20 times, necessitating a significant increase in issuer activity and investment interest.

Fundamental Analysis: Current Market and IPO Landscape

Today, the Russian stock market capitalization is primarily comprised of large state-owned companies (energy, major banks, transport), while the share of private issuers remains limited. By the end of 2023, the Russian equity market (Moscow Exchange) was valued at approximately ₽58–62 trillion. Key growth drivers in 2022–2023 included rising blue-chip stock prices and an influx of retail investments: the Moscow Exchange index posted a record rise of 44% in 2023. However, market liquidity remains low, with average daily trading volumes being small relative to capital, and the portfolio of the most active private investors is confined to a narrow range of stocks. Sectoral diversification is also weak, with a significant portion of the market consisting of commodity and financial companies, while high-tech and emerging industries are underrepresented.

Regarding IPOs, the primary issuance market has shown unstable dynamics in recent years. The IPO wave peaked in 2021 (₽247 billion), but by 2024 the volume of primary placements decreased to ₽81.6 billion. This signifies that the number of companies going public is limited, primarily to small firms or those in the state sector. Notable recent offerings included the online retailer Ozon (2021) and several 'digital' private companies, although most of the largest issuers (Sberbank, Gazprom, Rosneft, Lukoil, etc.) are either already listed or remain state-owned. Participation from private and institutional investors as purchasers of IPOs was significant in 2021–2023, but scaling up placements will require broad diversification of the issuer base. Experts estimate that to double market capitalization, an additional ₽8 trillion in stocks must be issued (i.e., averaging around ₽1.3 trillion annually).

Promising Industries and Issuers by 2030

To achieve the targeted level of doubled capitalization, the market must open access to new segments of the economy and bring not only state sector giants to the exchange but also large private companies. The most promising areas identified include:

• High Technologies and IT Sector. Following the President's directive, a special IPO regime for high-tech companies in priority industries is planned. This could involve software developers, digital platforms, advanced manufacturing, and biotechnology. Potential issuers may include large private fintech companies and internet giants (e.g., Ozon, Yandex, Tinkoff), provided the political conditions allow for their stock offerings.

• Financial Sector and Investment Funds. The listing of additional banks, insurance, and investment firms (including through the fragmentation of existing holdings) could yield significant capitalization growth. Possible issuers could include large private banks and leasing companies, as well as national pension funds (NPFs) and asset management firms offering investment products and seeking to expand capital.

• Infrastructure and Industrial Companies. This category includes transportation companies (e.g., Russian Railways, airports, seaports), energy, and gas transport networks, as well as the extractive industry. Parts of the infrastructure may be privatized or transferred to public companies. Agricultural sector enterprises (even though several large players are already listed), metallurgy, and machine engineering are also viewed as promising.

• New "Green" and Medical Industries. Potential placements in renewable energy sources, environmental technologies, and medical and pharmaceutical companies are anticipated. The government supports the development of biotech and "green" energy, creating demand for long-term investments in these areas.

According to NAUFOR, approximately ₽8–10 trillion will need to be raised through IPOs by 2030. This means dozens of large issuers should enter the market each year. The targeted doubling of capitalization to 66% of GDP suggests significant stock market growth even without accounting for organic stock price increases (an annual index growth of 10% is assumed based on expert calculations). Thus, it is crucial for market participants to monitor privatization and reform plans that could unlock new investment opportunities.

Key Market Challenges

Despite the evident potential, the targeted doubling of capitalization faces several fundamental hurdles:

• Low Market Liquidity. A relatively small number of active traders and institutional portfolio investors leads to irregular trading volumes and narrow 'bottlenecks' for purchasing large blocks of shares. Many issuers have few free shares in circulation: either the controlling stake belongs to the state or a limited number of owners. This restricts the attractiveness of stocks to new investors and slows down the entry of issuers onto the exchange.

• Poor Sector Diversification. Currently, a significant portion of capitalization is concentrated in traditional sectors – oil and gas, metals, and the banking sector. The low presence of IT, small business, and innovative companies in the market diminishes its appeal as a source of long-term investments. For private and institutional investors, this translates into heightened risks from sectoral dependency.

• High Costs and Complexity of IPOs. For issuers, going public involves substantial expenses (preparation of the prospectus, underwriting services, auditing, and ratings). Additionally, stringent regulatory requirements and administrative procedures are in place. This is particularly burdensome for medium and small companies that could diversify the issuer base. As long as the costs and risks of issuance remain high, many companies prefer to seek capital off-market or delay IPOs.

• Regulatory Barriers. Political and sanction pressures have complicated the return of foreign investments to the Russian market. While attracting foreign capital is not the focus of plans, the lack of international financing creates a greater burden on domestic resources. Moreover, investors pay attention to the stability of regulations: any sudden changes in taxation or trading restrictions could undermine trust and slow market growth.

These challenges require a comprehensive solution. In particular, the special segment for the IPO of technology companies proposed by the president aims to reduce barriers for promising firms. However, broader measures are necessary for the entire market.

Market Stimulus Instruments

NAUFOR and experts propose several measures that could accelerate market growth and eliminate obstacles:

• Tax Benefits and Incentives. Introducing preferences for companies going public (e.g., exemptions from certain fees and taxes during IPO) and for investors (tax deductions or reduced personal income tax rates on dividends/capital gains) will enhance interest from both sides of the market. Lowering the tax burden for participants in placements will make going public cheaper.

• Deregulation and Simplification of Procedures. Reducing bureaucratic requirements for reporting and approvals during IPOs, along with expediting listing procedures, will lower issuer costs. There are proposals to simplify access to the exchange for medium-sized companies and to register new securities more quickly. This could include the establishment of a 'fast track' for promising startups and technology enterprises, similar to the already announced special regime.

• Privatization of Key Assets. The government is advised to actively privatize stakes in large companies (e.g., Sberbank, VTB, Rosneft, etc.) and bring them to market through SPO or IPOs, thereby enriching the stock market. According to NAUFOR, the exit of private companies ('privatization') and the attraction of their shares will enhance the market's 'capacity' and bring in capital inflows.

• Development of Financing Institutions. Stimulating the issuance of corporate bonds and funds will allow institutional investors (pension funds, insurance companies) to increase their portfolio share in non-financial organization assets. This not only diversifies the market but also increases demand for IPOs as an additional investment tool.

• Support for Long-Term Investments. Continuing programs for Individual Investment Accounts (IIAs), community participation through NPFs, and other mechanisms (already discussed in national projects) aims to build a sustainable capital base. Strengthening the focus on long-term investments will help mitigate panic in response to short-term fluctuations and enhance the attractiveness of Russian stocks.

All of these measures, according to experts, should be implemented in tandem: tax breaks and simplification procedures will be combined with an emphasis on privatization and educational initiatives targeting private investors. The regulator (the Central Bank and the FAS), along with state programs aimed at developing the financial market, can play a key role in realizing these initiatives.

Investment Conclusions

For institutional and private investors, the prospect of doubling the market by 2030 signals an opportunity for long-term strategic planning. On one hand, the growth of capitalization to 66% of GDP opens avenues for substantial profits, particularly in forthcoming large company listings and technology projects. Market participants must recognize that a significant portion of this growth should originate from internal investments—active participation from Russian households and funds is anticipated. This means private investors should closely track promising IPOs and consider new long-term investment instruments.

On the other hand, investors must be prepared for inevitable risks: the target model requires a stable macroeconomic and regulatory environment. Any disruptions in the implementation of privatization and market reforms could delay market growth. Hence, portfolio investors should maintain a balanced approach, diversifying investments across sectors and instruments to mitigate potential volatility.

Ultimately, the plan to double capitalization creates a positive informational backdrop and suggests systemic changes that will benefit the entire financial system of the country. However, the success of this strategy depends on coordinated efforts between the regulator and investors: widespread participation in IPOs, as well as a long-term perspective on investments in Russian stocks, will be critical factors in achieving the goal. It is crucial for all market participants—from state companies to private issuers—to realize that the growth of the stock market is only possible through the expansion of the investor base and the reduction of entry barriers. In this case, the Russian stock market could indeed approach the ambitious threshold of 66% of GDP by 2030, creating new opportunities for both institutional and private investors.