“Russia is full of capital,” says Andrew Morozov, Country Investment Manager of
Morozov views the growing interest in Russia from global investors positively. “Unlike India or China, Russia is not the top priority for the global investors. One of the reasons is the image of the country created by Western media. However the situation is changing. More and more investors are coming here. Usually they are very competent ones ready tojudge the country not only by CNN picture.” More investors means more money.
In Russia capital is not a scarce commodity. But does it mean more competition? Not according to Andrew Tikhomirow, director of
Experience is crucial to handling big projects, Tikhomirow says. “US$200m to US$300m projects will emerge in the near future but now the optimal size of investment is around US$70m to US$100m.” Compared with other Russia Partners’ investments, which range between US$10m to US$15m, these estimates forecast significant growth in deal size. This summer
Many PE players have allocations for Russia but according to Tikhomirow finding investments is difficult. “The only PE houses in Russia which fully conform to Western business practices are Russia Partners and
There is also a new breed of Russian domestic investment companies emerging that are trying to emulate Western-style PE standards with various degrees of success. Among them are
Since the 1990s almost all of Russia’s major financial groups have in-house investment arms. Among the most prominent are
Cisco’s Morozov and Tikhomirow of Russia Partners believe that such differences do exist. In their opinion Russian PE funds have shorter investment horizons. They are less transparent and seriously depend on the opinions of their owners or main investors. Since Russian PE funds have no history of success or big names in their teams they face difficulties in getting access to institutional money. “For the big players, we are still considered first-time funds. And while many major Western institutional investors have allocations for Russia it isn’t easy to persuade them to work with us”, confesses Tsarkov. However, it seems that he isn’t overly concerned about it. “When we need additional financing there are easier and faster ways to source it locally.” He considers the nimbleness of Renova as one of its main competitive advantages and that is the reason his fund avoids club deals. “Approvals for club deals involve long and tedious processes. We can’t waste so much time.” Tsarkov says that the level of transparency of Renova Capital complies with very strict standards. “We have Western businessmen with serious reputations on our investment committee,” he adds.
All of the experts EVCJ spoke to agree that there is a deficit of interesting projects in the country. But in their opinion this deficit will not grow due to the new players emerging on the Russian investment market. Neither Renova, Russia Partners nor Cisco view each other as competitors as they are interested in different sectors and segments of the Russian market. The overall view on the ground is that there is still plenty of room for new PE players, especially for ones with a good understanding of financial or industrial sectors.