bne IntelliNews – Russian e-commerce giant Ozon gears up for U.S. IPO by late 2020, early 2021

Russia’s big three e-commerce companies Ozon Holdings say they will go public late this year or early next year, depending on market conditions, reports Sova Capital.

E-commerce is booming in Russia, with online sales growing twice as fast as traditional channels. And the four biggest companies – Ozon, Wildberries, Sber and Yandex – in the space are growing even faster at up to 80% per year, said Ozon CEO Alexander Shulgin. bne IntelliNews in an exclusive interview in September 2019

Ozon is owned and funded by conglomerate AFK Sistema, but has reached a stage in its development where it intends to expand by reaching out to institutional investors. Sistema is dual-listed in London and Moscow, and Russia’s leading private equity fund Baring Vostok is Ozon’s major shareholders. Sistema controls 43% of Ozon: 31% direct ownership and 13% through Sistema VC, of ​​which it holds 80%.

“We believe that Ozon’s IPO could be a powerful catalyst for Sistema in the short term. According to the Wall Street Journal, OZON could be valued at $3-5 billion, which we believe could be higher than what the market is currently valuing. By our estimates, this potential range implies 2020E EV/GMV multiples of 1.5x-2.4x if we assume OZON’s GMV to increase 100% year-over-year this year,” Sova said. Capital in a note.

Sistema currently owns a 43% stake in Ozon and plans for an IPO have been reported by The Wall Street Journal. They were later confirmed by Reuters the following day, which reported that Ozon intended to go public later this year, although the decision was yet to be finalized.

BCS Global Markets recalls on October 2 that Sberbank would have negotiated to invest in Ozon, but, according to its sources, the talks have since stalled and the plan has moved on to an IPO.

“We think an IPO would make sense – e-commerce is now a hot topic, making it easier to get an attractive valuation for the asset. This could push our NAV estimate higher. of System. [net asset value]especially if done around the targeted range,” BCS GM commented, viewing the news as positive.

According to sources quoted by the Wall Street Journal, OZON could be valued between $3 billion and $5 billion. The online retailer has already confidentially filed documents with the SEC for an IPO, according to the Wall Street Journal. Reuters reported that talks with Sberbank over the bank receiving a minority stake in Ozon have apparently stalled, and the online retailer is now planning an IPO instead.

Ozon is likely to spend the proceeds of the potential offering on its further development. The company aims to spend more than $300 million on logistics, adds C. 2.7 million square feet of distribution space and five open distribution centers, according to the Wall Street Journal, citing company data.

“We see the news as very positive for Sistema. We believe OZON’s IPO would help Sistema crystallize the value of this asset. We also believe that OZON’s potential valuation range of $3-5 billion could be higher than what the market is currently pricing,” Sova Capital said. “It is not yet clear how the IPO would be structured, but we would not be surprised to see that in addition to raising funds for the further development of OZON, Sistema could also try to monetize part of its stake. in the business.”

The potential valuation range shown in the article implies a 2019 EV/Gross Commodity Value (GMV) of 2.9-4.9x and 2020E EV/GMV multiples of 1.5x-2.4x assuming that Ozon’s GMV increases 100% y/y this year, Sova estimates.

OZON’s GMV grew 115% YoY in 1Q20 and 188% YoY in 2Q20, and it continued to grow more than 100% YoY in July and August, according to Sistema.

Russian online retailers received an additional boost from the lockdown environment following the coronavirus (COVID-19) outbreak this year.

According to Data Insight, the Russian e-commerce market will grow by 44% in 2020 to reach 2.5 trillion rubles ($31.8 billion), of which 300 billion rubles are due to additional gains associated with COVID-19. This effect is expected to be long-lasting due to the influx of new e-retail customers, the bulk of whom are likely to continue shopping online, increasing order frequency and the rapid development of grocery services in line.

“The Russian e-commerce market could grow by a compound average growth rate (CAGR) of 33% in 2020-24E to reach over 7 trillion rubles in 2024E,” says Sova Capital. “We believe that OZON, being the second largest multi-category e-tailer in Russia, is well positioned to benefit from these trends due to its rapid development in the market (already over 50% GMV reached in June) and expanding its logistics and fulfillment capabilities.

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