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  1. 1. N ew R ussia G rowth Private Equity Advisors Landscape and Evolution of Private Equity in Russia Alexey Panferov Managing Partner 30 June, 2010
  2. 2. Presentation summary <ul><li>Russian economy after the crisis </li></ul><ul><li>PE snapshot </li></ul><ul><li>Fundraising: international vs. local LPs </li></ul><ul><li>Case study: portfolio companies management throughout the crisis </li></ul><ul><li>Conclusions: Russian PE outlook </li></ul>
  3. 3. Russia: macroeconomic overview Source: RTS Source: State Statistics Committee Source: State Statistics Committee Source: Central Bank of Russia
  4. 4. Russian PE industry snapshot <ul><li>Summer 2008: </li></ul><ul><li>- Number of Professional GPs: 18 </li></ul><ul><li>- Total AUM: $6bn </li></ul><ul><li>Fundraising in 2009-now: </li></ul><ul><ul><li>Almost no new institutional money </li></ul></ul><ul><ul><li>Few funds with private LPs (Elbrus, Aton, UCP) </li></ul></ul><ul><li>Recent deals </li></ul><ul><ul><li>Financing and buyout of portfolio companies </li></ul></ul><ul><ul><li>Venture capital deals (mostly by ROSNANO) </li></ul></ul><ul><ul><li>Few large deals (VTB Capital/TPG – 35.4% of “Lenta” Retail Chain. $110.6m) </li></ul></ul><ul><li>Exits. Only few completed </li></ul><ul><ul><ul><li>UFG / Lion Capital – Russian Alcohol ($1bn+) </li></ul></ul></ul><ul><ul><ul><li>Mint capital – iNetX ($50m) </li></ul></ul></ul>
  5. 5. Fundraising: international vs. local LPs International LPs Local LPs
  6. 6. NRG. Profile. Independent alternative investment manager Volga River One C.P. First Closing: 29 Sept 2006 Current size (cash): US$178 m Number of LPs: 20 (15 private + 5 institutional) Portfolio companies: 6 (telecoms, retail, food production) Tenor (years): 5+2 with 51% approval of LPs Volga River Growth First Closing: 3Q 2010 Target size: US$250 m LPs: EBRD expected to be a core investor, commitments from 7 local LPs Number of portfolio deals: 2 deals warehoused Tenor (years): 5+2 with 75% approval of LPs
  7. 7. Most popular PE sectors in Russia. Performance in 2008-2010 % of bad loans to total portfolio of Russian banks Broad-band Internet subscribers, m Source: NRG estimates Source: State Statistics Committee Source: PWC, NRG estimates Source: State Statistics Committee
  8. 8. NRG Private Equity Portfolio Ufanet: sales & EBITDA, $ m (internet provider) Genser: sales & EBITDA, $ m (car dealer) Source: company data Source: company data Source: company data Source: company data Begemot: sales & EBITDA, $ m (toy retail chain) Umnitsa: sales & EBITDA, $ m (baby food)
  9. 9. <ul><li>A leading car dealer, occupying 12% of Nissan market in Russia </li></ul><ul><li>Balanced portfolio of 11 popular brands </li></ul><ul><li>2 3 modern dealerships in Moscow and in Central Russia </li></ul>Case Study: Genser Initial investments: 2007 Volga River One Fund entered promising Russian car retail market Hybrid equity: April 2009 Secured loan with equity kickers Expected IRR: 40-55% Transaction is warehoused for Volga River Growth, financing is provided by Russian HNWI New share issue: December 2008 Pre-money valuation: US$220 m (2.8x) Fund managed to attract US$74 m of equity financing during the credit crunch peak <ul><li>NRG role in value creation: </li></ul><ul><li>Strategic advice through NRG member of BoD </li></ul><ul><li>Pipeline of M&A targets, deal structuring </li></ul><ul><li>New CFO, comprehensive financial planning, budgeting and reporting process, IFRS accounts audited by PWC </li></ul><ul><li>Facilitation of debt financing </li></ul><ul><li>Equity and hybrid equity financing during the crisis </li></ul>Profitable exit
  10. 10. Case Study: Begemot <ul><li>Company description </li></ul><ul><li>Begemot is the second biggest toy retailer in Russia </li></ul><ul><li>Focus on mid and low price segments </li></ul><ul><li>Key toy supplier for leading retail chains in Russia </li></ul><ul><li>50 own and 32 franchisee shops in 81 cities across Russia </li></ul><ul><li>After new loan, the Debt/EBITDA ratio for the company is still below 2x </li></ul>Sales & EBITDA, US$ m <ul><li>Transaction summary </li></ul><ul><li>Secured loan with equity kickers </li></ul><ul><li>Use of funds: r efinancing of banks loans, working capital </li></ul><ul><li>Control: board seat and veto rights (transferrable to third parties) </li></ul><ul><li>Expected IRR: 42-48%. Floor IRR is 30.5% as secured by put option </li></ul>
  11. 11. Conclusion. Russian PE industry outlook <ul><li>Economy shows first signs of recovery but … </li></ul><ul><li>… availability of debt financing is still limited </li></ul>Market environment creates attractive opportunities for hybrid equity <ul><li>International LPs are considering Russia for investment but… </li></ul><ul><li>… afraid of country risks </li></ul>Currently international LPs most likely to invest in Russian secondaries <ul><li>Local LPs has their own pros and cons but … </li></ul><ul><li>… can invest in new funds </li></ul>Strong long-term partnership with local LPs allows to launch new funds and attract more investors subsequently <ul><li>Portfolio companies are seriously hit by credit crunch but… </li></ul><ul><li>… professional management helps meeting the challenges </li></ul>Currently private companies are reasonably valued thus opening opportunities for new deals which can result in high IRRs subject to professional management and deal structuring
  12. 12. Thank you! NRG Team Russia