Russian shoe chain Obuv Rossii plans listing
MOSCOW: Obuv Rossii, a Russian shoe retailer backed by billionaire Brooklyn Nets owner Mikhail Prokhorov, is seeking to raise as much as US$120mil in an initial public offering (IPO), according to a source.
The company said in a statement that it planned to offer a stake of as much as 40% on the Moscow Exchange in October and use the proceeds to double its store network over the next three to five years.
Prokhorov, who owns a quarter of Obuv Rossii, wouldn’t be selling his stake, said the person, who asked not to be identified because the information is private.
The offering may be the first major IPO by a Russian company since billionaire Vladimir Evtushenkov’s children’s goods retailer Detsky Mir PJSC sold shares in February.
Footwear is a resilient market that posted sales growth in ruble terms amid Russia’s recent recession, according to Discovery Research Group.
Obuv Rossii is unusual because it makes 60% of its sales through instalment plans, giving consumers as long as 10 months to pay for their shoes. An arrangement typical for expensive items like household appliances and fur coats turned out to be popular for US$150 leather boots, too.
“When a decade ago I heard at an industry conference that handset retailers are selling phones – even the cheaper ones – on credit to boost sales, I thought, why not do it with shoes?” Obuv Rossii founder and chief executive officer Anton Titov said in an interview in which he declined to comment on any IPO plans.
“At first, banks treated us as if we were maniacs, saying this won’t work with shoes. But it did.”
Prokhorov, who built his US$11bil fortune initially through metals and now owns interests from banking to energy to sports, bought his stake in Obuv Rossii in December through his family office.
His Renaissance Capital is among the investment banks managing the shoe chain’s IPO, along with BCS Global Markets, Citigroup and Sberbank CIB.
A spokesman for Prokhorov’s investment vehicle Onexim Group said Obuv Rossii was a private investment for the billionaire and declined to comment further.
When he decided to offer installments, Titov first started joint projects with lenders, enabling the company to offer customers interest-free loans. After banks tightened scoring procedures and cut down on lending after the 2008 financial crisis, Obuv Rossii started providing instalments to consumers itself.
“About 80% of our customers are women inclined to impulse purchases – they come to a store to buy shoes, and then they see a nice bag and want a belt also,” Titov said. “That’s where our instalments programme steps in.”
Obuv Rossii’s customers can generally afford buying its mid-price shoes without credit, according to Titov. “So, our instalments are rather a matter of marketing and winning consumer loyalty,” he said.
The default rate was 6.5% last year, when Russia was still in recession, and now is around 5%, which is “a very low level for consumer lending,” Titov said.
“The fraud risk is relatively low because shoes are a personalised product,” he said.
“If you are a swindler, and you buy shoes with the intention not to repay the instalment, it’s not easy to sell these shoes of a particular size and pattern as soon as you exit the store.”