Press about us

27 October 2021
The Banker

VTB Capital supports clients on big strategic questions in a post-Covid world

Marie Kemplay 

Alexander Pukhaev, VTB Capital’s head of global banking, on how the bank is continuing to support its clients at a moment when many are considering significant strategic transactions.

аа.png

As Russia’s arguably leading investment bank, VTB Capital is well-placed to benefit from what has been a very busy period of activity in the Russian capital markets. Much like in other regions, over the past 18 months the country’s markets have seen periods of pronounced equity capital markets, debt capital markets, and mergers and acquisitions (M&A) activity.

“In the early months of the year it was already relatively clear that it was going to be a highly intensive year. But as time has passed, that has only accelerated,” observes Alexander Pukhaev, VTB Capital’s head of global banking since March 2021.

Mr Pukhaev puts the burst of activity down to several factors. This includes the Covid-19 outbreak, which initially caused disruption, but has enhanced the pace of development and interest towards companies from IT-related sectors. The pandemic has also prompted a paradigm shift in thinking about how corporates can enhance productivity in a post-pandemic landscape. “Covid completely changed everything when it comes to the amount of attention companies are paying to communication channels,” he says. “Digitalisation was already a major theme, but it has now been taken to another level.” He also cites a greater focus on environmental, social and corporate governance (ESG) as another factor prompting significant strategic shifts.

Robust markets

For the time being, he also believes activity will continue to be robust. “With market conditions continuing to be supportive, more and more businesses are seeking strategic financing advice or are considering actions such as M&A or a spin off.” He observes that, given many companies are currently considering major transactions, such as an initial public offering (IPO) or a divestment, which require significant preparations and positioning, a pipeline of activity is already clear for 2022.

Mr Pukhaev recognises that the strong market conditions have also benefitted rival banks; VTB Capital is not the only bank within the Russian markets to have enjoyed a strong capital markets pipeline of late. However, for the long term, he does believe the fact that it is a part of the wider VTB Group, which provides a universal banking service with a multi-product offering to clients, stands it in very good stead.

“We do not only provide strategic advice, we can also provide the whole range of services such as loans, derivatives, repos, project finance and many others, that corporate clients in Russia require,” he says. “This is a strong integrated model because it means we have many points where we support clients. If they come to us looking for one solution, VTB is able to give them strategic advice and consider a wider product range. That is a clear advantage we as a group can offer.”

Constant competition

But, far from being complacent, Mr Pukhaev recognises that, particularly during the current fast-paced market conditions, the bank is in “constant competition” to deliver the high level and type of internationally benchmarked service that clients expect. He cites the shifts witnessed around IPO processes as one important example. “The way IPOs are now being managed has changed to a digital process; people are no longer travelling and the time period around investor education is much shorter. We need to be at the front of changes like this for both institutional and corporate clients,” he says.

The stiff competition, Mr Pukhaev reflects, not only relates to clients, but also ensuring the bank has the best and most experienced talent, with the right expertise, at a time when staff with advisory, ESG and digital markets skills are in strong demand. He concedes that ensuring the right talent is in place was a challenge the bank needed to rise to, but believes it is in a strong position, with “leading personnel” in all divisions. “The important thing for me is that we are always prepared to enhance our business; we’re ready to react to trends and to develop expertise proactively,” he says.

One such area is in special purpose acquisition companies, a trend that has created a lot of interest, although so far has not generated significant transactions within the Russian context. “It’s important for us to lead the debate in this area, because a lot of our clients are looking at the international context and are considering whether it’s an opportunity that could be right for situations in this market. We need to be able to give them the right advice.”

New wave of companies going public

Over the past 18 months, a series of macroeconomic factors have driven at times frenzied levels of capital markets activity globally. Russia has been no exception to this; however, Mr Pukhaev also believes the country’s own unique circumstances have significantly contributed. He observes that Russian markets have seen several cycles of companies launching onto the public markets, starting with the post-Soviet Union privatisations of the 1990s, then followed by further waves such as telecoms and internet companies in the early 2000s, and metals and mining companies in the mid-2000s.

“What we’re seeing now is an acceleration of the consumer cycle,” he says, “with a new set of companies that were created within the past 20 years and have now reached a critical size.” Mr Pukhaev gives 14-year-old Russian discount retailer Fix Price, which IPO-ed in March 2021, as an example, and believes a strong pipeline of other new companies, particularly in the technology sector, is an exciting prospect.

Across other areas of the market — including M&A, which is also in a highly active period — he believes there is a virtuous circle effect where the more market activity that takes place, the more companies are prompted to think about undertaking major strategic deals. “Companies see other firms enjoying success with an acquisition or an IPO and it prompts them to consider how they might need to reposition themselves, enhance or deconsolidate their market position,” he observes, adding that “it provides a platform to discuss strategy, what preparations they would need to undergo before a major deal, and what requirements they would need to meet to attract investor interest, such as boosting their growth or becoming more of an ESG leader.”

While Mr Pukhaev acknowledges there is “significant room for improvement” in the ESG area for many Russian companies, he also says that “this is something that now almost all leading companies has at the top of their agenda”.

“Companies understand that they need to enhance disclosure in order to continue obtaining financing and support their growth, and they also genuinely want to improve in this regard,” he says. Making changes that will lead a business to operate more sustainably can be a long-term project and Mr Pukhaev has been pleasantly surprised by the level of senior engagement by companies that are genuinely seeking to make lasting changes. “People are seeking broad advice about what they need to do in this area,” he says. “They want to be ready and to make changes proactively.”

Confidence about the future

As to whether the ongoing geopolitical tensions at play between Russia and countries such as the US, UK and the EU, and the potential for further economic sanctions, is making an impact, Mr Pukhaev is philosophical. “People will consider these things when making investment and issuance decisions,” he says. “But on the other hand, people have learnt to live with this macro-political backdrop and understand the potential inherent in this region that remains stable, growing and with low leverage, and, given how the markets are developing and performing, there is confidence about the future.”

Career history: Alexander Pukhaev

2021 Head of global banking, managing director, VTB Capital

2015 Deputy head of fixed income, managing director, VTB Capital

2013 Head of metals and mining, client coverage, managing director, VTB Capital

2011 Co-head of research, managing director, VTB Capital

2008 Head of natural resources, research, VTB Capital

2005 Metals and mining analyst, research, Deutsche Bank

Corporate Communications VTB Capital
IMPORTANT INFORMATION – TERMS OF ACCESS
FOR INFORMATION ONLY

The information and opinions contained within VTB Capital research reports are prepared by research analysts associated with JSC VTB Capital, VTB Capital plc and their non-U.S. affiliates (each such entity, a “VTB Group entity,” and all such entities collectively, the “VTB Group”). The information, analytic tools, and/or models referenced herein (and any reports or results derived from their use) are intended for informational purposes only. VTB Capital has no obligation to update this information and may cease provision of this information at any time and without notice. The information and opinions described herein may be based on VTB Capital research reports that have already been published and made available to research customers. Accordingly, members or clients of the VTB Group may have acted upon or used the information or conclusions contained in this research report, or the research or analysis on which they are based, before its publication.

NO OFFER, RECOMMENDATION, INDUCEMENT OR ADVICE

This material does not constitute nor is it intended as an offer, inducement, promotion or solicitation for the purchase or sale of securities, investments or other financial instruments. Neither the information contained in the report nor any future information made available with the subject matter contained in the report will form the basis of any contract. This material is not intended to constitute an investment recommendation as defined by Article 3(1) (35) of Regulation (EU) No 596/2014, and related rules and regulations (each as amended). VTB Capital is not acting as a fiduciary. VTB Capital does not provide, and has not provided, any investment advice or personal recommendation to you in relation to any transaction and/or any related securities described herein and is not responsible for providing or arranging for the provision of any general financial, strategic or specialist advice, including legal, regulatory, accounting, model auditing or taxation advice or services or any other services in relation to the transaction and/or any related securities described herein. Accordingly, VTB Capital is under no obligation to, and shall not, determine the suitability for you of any transaction described herein. You must determine, on your own behalf or through independent professional advice, the merits, terms, conditions and risks of any transaction described herein. Any reference to past performance of securities or other financial instruments is for informational purposes only and does not imply or indicate future results.

CONFLICTS OF INTEREST

VTB Group entities do and seek to do business with companies referenced in research reports. Thus, investors should be aware that the VTB Group may have a conflict of interest that could affect the objectivity of this research report. Disclosures on the companies referenced in this report can be obtained by accessing the following webpages:

Research disclosures webpage - http://research.vtbcapital.com/ServicePages/Disclosures.aspx.

Investment Recommendations disclosures webpage https://www.vtbcapital.com/about/information-disclosure/investment-recommendations/

NO LIABILITY

Whilst every care has been taken in preparing the reports, no research analyst, director, officer, employee, agent or adviser of any member of the VTB Group gives or makes any representation, warranty or undertaking, whether express or implied, and accepts no responsibility or liability as to the reliability, accuracy or completeness of the information set out in the reports. Any responsibility or liability for any information contained in the reports is expressly disclaimed. All information contained in the reports is subject to change at any time without notice. No member of the VTB Group has an obligation to update, modify or amend the reports or to otherwise notify a reader thereof in the event that any matter stated in the reports, or any opinion, projection, forecast or estimate set forth in the reports, changes or subsequently becomes inaccurate, or if research on the subject company is withdrawn.

In the United Kingdom, the reports are approved and/or communicated by VTB Capital plc, a bank authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The reports are intended for those persons that would be classified as eligible counterparties or professional clients under the Financial Conduct Authority’s Conduct of Business rules. The reports have been made publicly available, and as such, constitute an ‘acceptable minor non-monetary benefit’ pursuant to Article 12(2) Commission Delegated Directive (EU) 2017/593 (as implemented into United Kingdom domestic law and regulation following the United Kingdom’s departure from the European Union). The reports do not intend to communicate an invitation or inducement to engage in investment activity, and as such do not fall within the definition of a Financial Promotion as per s.21 of the Financial Services and Markets Act 2000 (FSMA), and related rules and regulations (each as amended).

Reports are distributed in the European Economic Area (EEA) by VTB Bank (Europe) SE, registered with the number HRB 12169 at the register of companies in Frankfurt am Main and authorised by the Bundesanstalt fur Finanzdienstleistungsaufsicht (Federal Financial Supervisory Authority), Graurheindorfer Strasse 108, 53117 Bonn, Marie-Curie-Strasse 24-28, 60439 Frankfurt am Main and the European Central Bank, Sonnemannstrasse 20, 60314 Frankfurt am Main to provide banking transactions and financial services. Reports are intended for those persons classified as Eligible Counterparties or Professional Clients pursuant to Directive 2014/65/EU. In the United States, these reports are intended for persons who are considered ‘institutional investors’ as defined by FINRA Rule 2210(a)(4).

In Singapore, the reports are distributed by VTB Capital plc to accredited investors, expert investors or institutional investors only (as defined in the applicable Singapore laws and regulations and are not intended to be distributed directly or indirectly to any other class of person). Recipients of these reports in Singapore are to contact VTB Capital plc, Singapore branch in respect of any matters arising from, or in connection with, this report. VTB Capital plc, Singapore branch is regulated by the Monetary Authority of Singapore.

In Hong Kong, the reports are distributed by VTB Capital Hong Kong Limited, a licensed corporation (CE Ref: AXF967) licensed by the Hong Kong Securities and Futures Commission to “professional investors” (as defined in the Hong Kong Securities and Futures Ordinance and its subsidiary legislation) only.

In Russia, the reports are approved and/or communicated by JSC VTB Capital, a professional securities market participant regulated by the Central Bank of Russia. VTB Capital is not providing either investment advice or individual investment recommendations to the recipients of the reports or any other persons either under Federal Law On Securities Market of 22.04.1996 No. 39-FZ (or related rules and regulations, each as amended) or otherwise. These reports are not advertising as defined in Russian legislation, but are information and analysis not having product promotion as their main purpose and do not provide appraisal within the meaning of the Russian legislation on appraisal activity. Research reports do not constitute a personalised investment recommendation as defined in Russian laws and regulations, are not addressed to a specific client, and are prepared without analysing the financial circumstances, investment profiles or risk profiles of clients.

THESE REPORTS ARE INTENDED FOR ELIGIBLE COUNTERPARTIES OR PROFESSIONAL INVESTORS AS DEFINED IN THE RESPECTIVE JURISDICTION.

The reports are being furnished to certain persons as permitted by applicable law, and accordingly may not be reproduced or circulated to any other person without the prior written consent of a member of the VTB Group. Unauthorised use or disclosure of the reports is strictly prohibited.

By clicking ‘Confirm’ you attest that you are either a professional investor or eligible counterparty and agree to our terms of access as described above. If you are not considered to be a professional investor or eligible counterparty, please click ‘Decline’ and you will be reverted back to the VTB Capital website.