Russia’s Fix Price raises IPO expectations as BlackRock and Qatar back float

US asset manager BlackRock and the sovereign wealth fund of Qatar will be cornerstone investors in the London flotation of Russian discount retailer Fix Price, which could value it at more than $8bn.

Fix Price is targeting up to $9.75 a share for its initial public offering this month, making it the largest Russian company to float since the first western sanctions against Moscow in 2014.

The group said on Monday that BlackRock, the sovereign wealth funds of Qatar and Singapore, and Dutch pension fund APG had agreed to purchase $475m of shares as part of the offering.

It expects to raise up to $1.7bn from the deal, which could value the company at up to $8.3bn.

The cornerstone buys from major institutional investors and boost to the $1bn Fix Price initially sought at a $6bn valuation reflects confidence in its discounter model at a time when Russia’s slumping economy is forcing consumers to curb spending.

The top range of the IPO, priced at $8.75-$9.75 per share, would make it the largest Russian flotation since 2012, when mobile operator Megafon raised $1.8bn in London.

“We have been pleased with the strong response to the Fix Price story from the investment community. The variety value retail concept is a proven success story around the globe, and one that has delivered attractive returns to investors,” said Dmitry Kirsanov, Fix Price’s chief executive, in a statement.

Several Russian companies are also eyeing public listings amid strong demand from emerging market investors, many of whom feel Moscow’s stand-off with the west over sanctions has created bargains in the consumer sector.

Ozon, one of Russia’s largest online retailers, went public in New York last year at a valuation of $6.2bn. Its market capitalisation has since risen to more than $13bn.

Fix Price, whose business model is akin to that of the UK’s B&M and Dollar General in the US, has prospered as real incomes have fallen 11 per cent since 2013, including a 3.4 per cent slump last year.

It has a range of about 1,800 products, including household goods, cosmetics and non-perishable food, which it sells at fixed prices all under Rbs250 ($3.40), with about 80 per cent under Rbs100.

Last year, revenues increased 33 per cent to Rbs190.1bn, with net profit of Rbs17.6bn. Like-for-like sales have risen at double-digit rates every quarter for 16 consecutive quarters.

The IPO consists solely of secondary sales from founders Sergei Lomakin and Artem Khachatryan, who plan to retain control of Fix Price, as well as minority investors Goldman Sachs and Marathon Group.

BofA Securities, JPMorgan, Citigroup, Morgan Stanley, and VTB Capital are joint co-ordinators and joint bookrunners on the deal, which is expected to price on Friday this week. The stock will then begin public trading in London and Moscow on March 10, Fix Price said.