Russian Helicopters, the state-owned holding that designs and manufactures Mil and Kamov civil and military helicopters, is gearing up for an ambitious growth drive fuelled by a $500 million initial public offering in London and Russia.
The offering of $250 million in shares held by majority owner Oboronprom and another $250 million in new equity gives investors a rare chance to buy into the country's traditionally closed aerospace and defence sector.
The company, created in 2007 as part of a Russian government drive to consolidate its aerospace industry, will use the proceeds to pay off debt and buy outstanding shares in subsidiaries.
But the listing is a key plank in a drive for global prominence. According to chief executive Dmitry Petrov: "The main element of our strategy is to emerge as one of the three leading producers in helicopter construction. We are in a very competitive field. There are six main players, excluding China.
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"At this time, we are growing faster than our competitors. We aren't afraid of the competition."
Russian Helicopters consists of 11 enterprises including the Mil and Kamov design bureaux and the Kazan Helicopter Plant, and produces the widely sold Mi-17 and Mi-171 helicopters.
The firm is one of the most productive parts of Russia's flagging aerospace sector, with steady sales to China, India, and other Asian countries, and recent success in Latin America.
The domestic market is also set to take off with large orders from the Russian armed forces, which need to replace hundreds of Mi-8s and introduce new attack and training helicopters such as the Mi-28N and Ansat.
"While we have already achieved leading positions in some of the most attractive and highest-growth market segments, the IPO will help us to increase further our global market share," says Petrov.
Evidence of that global potential came this month, when Russia and the USA agreed a $370 million deal to supply 21 Mi-17 helicopters to Afghanistan.
INVESTOR INTEREST
Russian Helicopters has also applied for its shares to be listed on Russia's RTS and MICEX exchanges, a mandatory requirement for Russian firms listing overseas. The shares will be listed only as global depositary receipts, so the company will not get a full FTSE listing and will require a lower level of disclosure. A roadshow is imminent.
In 2010 Russian Helicopters' consolidated revenue rose 42% to $2.2 billion, and market analysts say the company has good foundations and is likely to attract strong interest from investors.
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Russian Helicopters will finish a process of consolidation by obtaining 100% control in three major subsidiaries - the Ulan-Ude aircraft factory, the Kazan helicopter plant and Rostvertol - says Alexandra Lozovaya, deputy chief of analysis at InvestCafe: "I expect the placement will be successful due to the firm's unique position in the sector. Previously, the United Aircraft Corporation [which owns Sukhoi] was the only major aircraft sector issuer on the Russian stock exchange."
Bank of Moscow analyst Mikhail Lyamin values the company at about $1.6 billion, based on $500 million for 30% of its shares: "Russian Helicopters is unique, thus it is likely to attract major interest from Western investors and major funds."
"Russian funds and portfolio investors are definitely positive about its plans and prospects for share price growth."
Source: Flight International