Oct 31, 2016
FUTURE for its own

Author: Marina Rudneva

The first IPO of a pension fund on the Moscow Exchange has been completed: Boris Mints’ FG FUTURE placed 20% of the Company’s shares and raised almost RUB 12 bln. According to market participants, a significant portion of the IPO was acquired by management companies, banks and pension groups that are closely tied to FUTURE

FG FUTURE’s securities (consisting of five non-state pension funds) were placed on the market at an average price of the previously announced amount of RUB 1.19 thousand per share. As a result, the selling shareholder raised RUB 11.7 bln, while the group’s market capitalization comprised RUB 58.5 bln. According to Boris Kvasov, Director of ECM at VTB Capital (the arranger), more than one thousand transactions were made during the IPO, of which the share of individuals comprised around RUB 3 bln, and the remainder was bought by institutional investors – primarily consisting of banks and management companies (MC). "The demand for FUTURE's shares exceeded the supply by 1.2 times; we received more than a thousand applications from individuals – this definitely proves the interest in the pension business across a wide range of investors," Marina Rudneva, CEO of FG FUTURE, stated. A request for the purchase of a 3% stake in FG FUTURE was the largest application made during the IPO. However, the Group does not disclose the names of the buyers.

PJSC FUTURE Financial Group is the sole owner of the FUTURE, Uralsib, Obrazovaniye, Our Future (formerly known as Russian Standard) and Telecom-Soyuz non-state pension funds. According to the Bank of Russia as of June 30, the aggregate assets of the funds amounted to RUB 292 bln and the number of clients comprised more than 4.5 million people. The authorized capital of the PJSC comprises 49.17 mln ordinary shares. Boris Mints, the owner of the O1 Group Limited, is the controller of FG FUTURE.

The first IPO of a pension fund was held under challenging conditions. The arrangers noted that, among other risks, the shares and NPFs of FG FUTURE have been pledged under a loan granted by the Credit Bank of Moscow (CBM). Previously, FG FUTURE reported that the obligations under the loans of the O1 Group amounted to RUB 18 bln and the provision from the Group and its shareholders comprises more than RUB 60 bln. On October 28, Igor Mints, a member of the Board of Directors of FG FUTURE, announced that the shares of NPF were released from the pledge and replaced by other assets from O1 and from FG FUTURE’s own shares.

According to market participants, the indirect increase of FG FUTURE's capitalization is advantageous to its pledge holders, since its loans now require fewer provisions. From the revenue received from the sale of shares, RUB 3-4 billion will be transferred for the repayment and servicing of CBM loans, and the remaining funds will be reserved for the development of the pension business. According to Sergei Korolev, a financial advisor from Alor Broker, there was no active company in terms of FG FUTURE sale, although the order book was opened during the week.

"It's a captive story I would say – we did not record activity at the pre-marketing stage or notice any road show," confirms a top manager from one of the top 10 asset management companies. Although pension funds did not directly participate in the acquisition of FG FUTURE's shares, several independent sources from “Kommersant” state that the securities were bought by management companies and banks closely connected to FG FUTURE and other large pension groups, including Alor, Blagosostoyanie, Otkritie and Safmar. Alor, Otkritie and Safmar refused to give any comments on the matter, and the representatives of Blagosostoyanie denied the acquisition of any securities of FG FUTURE.

According to Yury Nogin, director of the Financial Institutions Ratings Group of ACRA, the logic of mass participation of individuals in the first IPO of a pension fund in the context of another freezing of pension savings is "not obvious". FUTURE is perhaps the only major player on the pension market without an “in-orbit” bank, notes Dmitry Alexandrov, president of the National League of Managers. However, the group places deposits. According to Mr. Alexandrov, the securities could have been bought out by both banks and MC’s working with the group, as well as by other major players, as part of a cross-investment in projects.

Pavel Aksenov, Vitaly Gaidayev