Why IPO is a Trend for Russian Business and What to Expect in 2025

Why IPOs Are Trending Among Russian Businesses and What to Expect in 2025

In recent years, Initial Public Offerings (IPOs) have become one of the key trends in the Russian financial market. For companies, it's not just a means of raising capital, but also a tool for enhancing visibility and trust. The IPO market achieved record results in 2024, and forecasts for 2025 promise continued growth. Let's explore why IPOs are gaining popularity, which sectors are leading, and what investors and traders can expect in the near future.

What is an IPO and Why is It Important for Business

An IPO is the process through which a private company first offers its shares to the public market. For businesses, it presents an opportunity to raise funds for development, while for investors, it provides a way to invest in promising companies.

Key reasons for the popularity of IPOs:

1. Capital Raising: Companies utilize the funds raised for scaling up, developing new products, or repaying debts.
2. Increased Visibility: Going public elevates a company's status, strengthening its position among partners, clients, and employees.
3. Transparency and Trust: Companies that have gone public are required to adhere to high standards of corporate governance, making them more attractive to investors.
4. Using Shares for Employee Incentives: Shares can become part of compensation packages, a trend especially popular in the tech sector.

Record Year: Outcomes of 2024

The year 2024 proved to be significant for the Russian IPO market. During this period, 15 new issuers entered the stock market – a record in recent years. The total transaction volume (IPOs and SPOs) exceeded 100 billion rubles.

• Leading the placements was Alfa-Bank: it accounted for 7 IPOs and 3 SPOs with a combined volume exceeding 70 billion rubles, representing more than two-thirds of the market.
• Increased activity in the regions: companies from various sectors, including retail, technology, and industry, actively went public.

Sectors Leading the IPO Market

In 2024, the main drivers of the market were companies from the information technology (IT), finance, and retail sectors.

1. Information Technology:

   • The sector's growth is attributed to import substitution and an increasing demand for domestic solutions.
   • Companies use IPOs not only to attract capital but also to draw talent through shares and options.

2. Retail and FMCG:

   • Major chains utilize funds for logistics development, opening new outlets, and implementing digital technologies.
   • An example of a successful placement was the IPO of a retail leader that raised more than 10 billion rubles.

3. Financial Sector:

   • Banks and insurance companies use IPOs to strengthen their positions and develop new products, such as fintech solutions.

What to Expect in 2025

Experts predict that 2025 may surpass 2024 in terms of the number of IPOs and the amount of funds raised. According to the Central Bank’s estimates, over 500 Russian companies are ready for listing.

Factors driving the growth of the IPO market include:

1. Easing monetary policy: A reduction in the key rate will make investments in stocks more attractive for large players.
2. Deferred demand: Many companies postponed their IPOs in anticipation of stabilizing economic conditions.
3. Increased interest from retail investors: The development of investment platforms, such as "Tinkoff Investments" and "SberInvestor," enhances market accessibility for individuals.
4. Expansion of the list of sectors: In 2025, an increase in activity is expected in areas such as green energy, medical technologies, and logistics.

The Impact on Investors and Traders

IPOs open unique opportunities for investors but are also associated with certain risks.

Opportunities:

1. Capital Growth: Investments at the time of the offering can yield significant returns, especially if the company develops successfully.
2. Portfolio Diversification: The emergence of new issuers allows investors to expand their assets across different sectors.
3. Access to Innovative Projects: IPOs are often conducted by companies with innovative products and services.

Risks:

1. Market Volatility: The first months after an IPO may be accompanied by significant fluctuations in stock prices.
2. Lack of Stable Profitability: Some companies at the IPO stage may not yet have achieved sustainable profitability.
3. Geopolitical Instability: Sanctions and restrictions may reduce interest in Russian stocks in international markets.

Comment from Open Oil Market

Sergey Teryoshkin, founder of Open Oil Market, notes:
"The growing popularity of IPOs indicates that Russian businesses are adapting to new conditions, finding ways to attract capital domestically. This is particularly relevant in an environment of high key rates and limited international opportunities. In 2025, the IPO market promises to become a key driver for the domestic economy, offering unique opportunities for growth for both investors and businesses."

Conclusion

IPOs are becoming an important tool for Russian companies, allowing them to raise capital, strengthen their market positions, and enhance visibility. For investors, this is an opportunity to invest in promising projects at early stages of growth. However, successful participation in IPOs requires careful analysis of the company, evaluation of its financial metrics, and consideration of market risks.

Considering current trends and forecasts for 2025, the Russian IPO market retains significant potential. If you wish to capitalize on the opportunities presented by IPOs, stay informed and analyze promising companies.