EPAM Systems, an offshore software developer with major R&D centers in Russia, Belarus and Ukraine, has informed the US Securities and Exchange Commission that it plans to launch an IPO, reported Russian daily Vedomosti on Thursday.
In 2010 EPAM (Effective Programming for America) generated $39 million in EBITDA on the back of $222 million in revenues, up 48% and 81% over the previous year, respectively, writes VTB Capital in its comment on the forthcoming IPO. About 50% of the stated revenues were generated by American customers, with 14% coming from Russia and the rest from Europe and other countries.
According to EPAM’s preliminary IPO prospectus, the company plans to raise $100 million and has chosen Barclays Capital, Citigroup Global Markets, Renaissance Securities and UBS Investment Bank as the organizers of its public offering. A source close to the proposed deal told Vedomosti that EPAM shareholders value the company at $1 billion and that they are targeting the NASDAQ for IPO in the fall this year.
Shares in EPAM would be sold by the founders and a shareholder group that acquired stakes at a later date. In 2006, Russia Partners, an New York based asset management firm owned by Siguler Guff & Co, bought a “significant” stake in EPAM. According to many sources, this was the largest non founder stake, possibly even controlling.
In 2008, EPAM Systems raised $50 million in financing from Renaissance Investment Management, Da Vinci Capital and Euroventures Capital. In the spring of 2010, VTB Capital, the investment arm of Russian state controlled VTB Group, acquired a minority stake in EPAM.
The potential EPAM IPO could precipitate a stock re-rating EPAM competitor IBS Group. IBS Group, listed in Frankfurt, owns a controlling 84% in Luxoft, the leading Russian exporter of high-end programming solutions, which generated revenues of $206 million in 2010, similar to EPAM. While Indian peers trade at 15-20x their EV/EBITDA ratio forecasted for 2011, IBS, with two-thirds of EBITDA in 2010 generated by Luxoft, currently trades at 9.1x. The first US IPO of a Russian offshore developer will put IBS Group’s exposure to Luxoft in the spotlight, conclude VTB Capital analysts.
Last month, Luxoft announced that it has agreed with Harman International, a global audio and infotainment group, to design and develop sophisticated infotainment systems for the automotive industry.
