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Kenneth Howe

IPOs in current climate seen as  'stupid move'
The global financial crisis has delayed but not derailed plans by Basic Element - the investment conglomerate owned by Russian oligarch Oleg Deripaska - to list a variety of its aluminium, car and energy companies in  various markets including Hong Kong, sources said in Moscow last week.
Privately held Basic Element has never officially disclosed which of its 100 companies it plans to take public - or where - citing regulatory constraints.
But UC Rusal, its largest company by revenue and the  biggest aluminium company in the world, is widely expected to list in Hong Kong.
In addition,  various knowledgeable sources suggest at least three other Basic Element companies are being readied for listing.
These include SMR, a group of six copper, molybdenum and gold mining operations; EuroSibEnergo, an energy company with large hydropower holdings; and a secondary offering in GAZ Group, which produces buses, trucks and the legendary Volga  sedan.
'Almost all of our companies are ready,' said Basic Element chief executive Gulzhan Moldazhanova, without identifying specific entities.
'We are preparing auditors' reports, financials. We have strong policies on health and safety, emissions and strategies for development.'
But, she added: 'At the end of the day, whether we go public or not would depend upon the market. And have you seen many listings floated in the last three months?'
Alexander Filatov, director of strategy and business development for the conglomerate's Russian Machines unit, was more blunt.
'The only thing we can say is common sense - it's completely stupid to go to the stock exchange in the current situation,' he said.
'And if it doesn't change in 2009, you wouldn't see an  initial public offering then, either.'
Hong Kong remains an attractive place to list, said Ms Moldazhanova, 'because the universe of investors overlaps'.
Much of Basic Element's assets are in mining and metals, which comprise a large share of companies listed in Hong Kong.
However, plunging markets worldwide - Russia's two stock exchanges are down about 60 per cent since their peaks in May - have battered Basic Element and its owner.
Mr Deripaska has been forced to cede his 20 per cent stake in Magna International, the Canadian  vehicle parts maker, after a margin call from creditors who had bankrolled the US$1.4 billion deal.
Less than a week later, it gave up its 10 per cent stake in Hochtief, Germany's biggest builder.
Standard & Poor's has placed Basic Element's Russian Bank Soyuz on credit watch 'with negative implications'.
Last week, the firm shut  its vast GAZ  vehicle plant in Nizhny Novgorod for several days, anticipating leaner times for car and truck sales.
In the past few months, the value of Mr Deripaska's holdings has declined by US$16 billion, according to Bloomberg.
Russia has designed a US$50 billion rescue package for cash-strapped companies, but it comes with a leash, giving authorities veto power over financial decisions.
Despite the challenges,  Ms Moldazhanova views the situation in Russia as largely a financial crisis.
'I honestly believe Russia will recover quickly,' she said. 'The big difference I see for us is we are capable of a soft landing' for both the economy and the company.
'We are producers of specific goods,' she said. 'Therefore, a financial crisis doesn't hit the nature of our business. We have plants with capacity and with demand, so it is all a matter of recovery.'
For Basic Element, she added: 'The main period of collecting assets is over.' The job now is to 'look at quality and cost controls'.
Meanwhile, Ms Moldazhanova said Basic Element had signed a 'co-operation agreement' with Citic Construction, part of the mainland's Citic Group, a state-owned company. The Russian company has committed to billions of dollars of construction for the 2014 Winter Olympics in Sochi on the Black Sea.
The purpose of the initial agreement is for Citic to step in to replace Basic Elements partners should they back out.
Basic instinct
Basic Element is waiting for the market to settle before launching IPOs
Oleg Deripaska's holdings have in the past few months fallen by, in US$: $16b



Deripaska  unit listings thrown off course