Superinvestor Conference, November 2009, Paris

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Superinvestor Conference, November 2009, Paris

  1. 1. NewRussiaGrowth <br />Private Equity Advisors<br />Landscape and Evolution of Private Equity in Russia<br />Andrey Dobrynin<br />Managing Partner<br />November 2009<br />
  2. 2. Presentation roadmap <br /><ul><li>Russian economy: what has happened over the past 12 months?
  3. 3. What was Russian PE industry before the crisis?
  4. 4. What happened with portfolio companies, GPs and LPs during the crisis?
  5. 5. Whatnew financial products were developed?
  6. 6. How will Russian PE industry evolve in the next few years?</li></ul>2<br />
  7. 7. Russian macro picture<br />Industrial production, y-o-y %<br />Real disposable income, y-o-y %<br />Source: State Statistics Committee<br />Source: Central Bank of Russia<br />RTS index<br />USD/RUB<br />Source: RTS<br />Source: Central Bank of Russia<br />3<br />
  8. 8. What was PE industry in Russia before the crisis<br /><ul><li>18 Professional GPs (with assets of more than $150m) with total AUM $6bn
  9. 9. Only few are local and independent
  10. 10. Most are subsidiaries of investment banks, family offices or foreign PE groups
  11. 11. Growth capital is main investment strategy
  12. 12. Target industries: retail, financial sector, consumer services, telecoms</li></ul>4<br />
  13. 13. What is NRG<br /><ul><li>Independent alternative investment manager
  14. 14. Volga River One: size - $177m, first closing - 2006; number of LPs – 20
  15. 15. 6 investments: telecoms, retail, food production
  16. 16. Valuation : 116% of invested capital (E&Y)
  17. 17. Volga Credit Opportunity – fundraising $250m</li></ul>5<br />
  18. 18. What happened to PE investments?<br />% of bad loans to total portfolio of Russian banks<br />Retail trade turnover, y-o-y %<br />Source: NRG estimates<br />Source: State Statistics Committee<br />Food & beverage production, y-o-y %<br />Broad-band Internet subscribers, m<br />Source: PWC, NRG estimates<br />Source: State Statistics Committee<br />6<br />
  19. 19. NRG Private Equity Portfolio: Case study<br />Ufanet: sales & EBITDA, $ m<br />Genser: sales & EBITDA, $ m<br />Source: company data<br />Source: company data<br />Ufanet: number of subscribers, ths<br />Genser: debt, $ m<br />7<br />Source: company data<br />Source: company data<br />
  20. 20. NRG Credit Opportunity case study<br /><ul><li>Begemot is the second biggest toy retailer in Russia
  21. 21. Focus on mid and low price segments
  22. 22. 50 own and 32 franchisee shops in 81 cities across Russia
  23. 23. Secured debt $20m with current interest 18% and equity kickers
  24. 24. Expected IRR: 42-48%, floor IRR is 30.5%</li></ul>8<br />
  25. 25. Russian PE industry outlook<br /><ul><li>Limited number of opportunistic deals in the next 6 – 12 months
  26. 26. Return to classic “growth capital” model in 12-24 months
  27. 27. Limited availability of debt
  28. 28. Poor track record will create difficulties in fundraising for many GPs
  29. 29. Low deal competition
  30. 30. Attractive valuations and high IRRs</li></ul>9<br />
  31. 31. Summary<br /><ul><li>Russian economy has started recovering after the crisis
  32. 32. 18 institutional GPs with AUM of more than $150m before the crisis
  33. 33. Only a couple of GPs left with significant amounts of dry powder
  34. 34. Most PE portfolios have been hit hard
  35. 35. Interesting opportunities are available in the credit market
  36. 36. Few successful GPs will enjoy low competition in the next couple of years</li></ul>10<br />

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