Luxoft, a major offshore software developer headquartered in Moscow, announced yesterday that it has filed a registration statement for a proposed initial public offering of its Class A ordinary shares. The book-running managers in the operation will be UBS Limited, Credit Suisse, J.P. Morgan, VTB Capital, and Cowen and Company.
According to the filing, Luxoft is expecting to raise $80 million during the IPO – although this number may change closer to the offering date.
In the fiscal year that ended on March 31, 2013, the company posted $314.6 million in revenue, showing 16% year-to-year growth.
Founded in 2000, Luxoft is part of the IBS Group, where it accounts for 87% of the group’s valuation – some $519 million, according to an analysis conducted last year by Uralsib Capital. The company currently employs more than 5,900 people in development offices in Russia, Ukraine, the UK, Vietnam, Romania, Germany and Poland, as well as in marketing offices in the US and on Cyprus.
Luxoft recently expanded its US presence by acquiring the open-source solutions of Freedom OSS for an undisclosed sum.
Beyond software outsourcing, Luxoft’s strong points include human-machine interfaces (HMI) for next-gen automotive solutions. In its December 2012 review of the auto sector’s most far-reaching trends, Gartner named Luxoft among the world’s four key providers of connected vehicle technology and services, including such important functional areas as telematics, advanced driver assistance systems (ADASs), infotainment, and mobility services.
“One of the strengths of this company lies in its human resource assets: they have attracted the cream of the crop of Russian IT specialists,” said industry veteran Nikolai Puntikov in an exchange with East West Digital News. “However, Luxoft still faces the challenge of translating this into more tangible and protectable IP assets.”
“This IPO will be good news for Russia’s IT industry,” Puntikov added. “It will reinforce the international image of Russian programmers and companies, and it’s this kind of success story that may stimulate the interest of entrepreneurs and financiers in this sector.”
Russian tech companies go West
Over the last few years several Russian tech companies have sought introduction on Western stock exchanges, where the volume of available funding is far more significant than on the still little developed local capital markets. In October 2010 Mail.Ru Group, one of the leading players on the Russian Internet scene, was introduced on the London Stock Exchange. In May 2011 the search giant Yandex raised $1.3 billion during its NASDAQ IPO.
At the beginning of 2012 EPAM Systems, a CEE-oriented offshore software developer and one of Luxoft’s rivals, also launched a NASDAQ IPO. The results, however, were lower than the company had expected: instead of the forecast valuation of $650 to $730 million, EPAM Systems was valued at about $490 million.
The trend of going public on Western stock exchanges was also supported by Russian mobile operator Megafon, which raised $1.7 billion in November 2012 by trading approximately 15% of its shares on the London and Moscow stock exchanges simultaneously. A more recent example is the $212 million NASDAQ IPO by the payment operator Qiwi earlier this month.
There are also players on the Russian market who have already announced IPO plans but have not yet filed official statements. Among these are online fashion shopping club KupiVip.ru, which has one more year to live up to its IPO promise, and airline ticket booking site OneTwoTrip, with a Western IPO planned for 2014.
Some Russian companies have not succumbed to the tempting prospects of public offering, however. Kaspersky Lab’s CEO Eugene Kaspersky announced in February that in order to remain as flexible as possible the company had abandoned IPO ambitions and would buy back a 20% stake sold to a private equity investor in 2012.
Last year Vontakte.ru (VK.com), the biggest Russian social network, postponed its IPO indefinitely; as CEO Pavel Durov put it, “Facebook’s IPO has destroyed the trust of many individual investors in social networks.” However, the UCP fund, a new major Vkontakte shareholder, stated recently that an IPO could take place after “three or four years of development of the company and an increase of its valuation.”
