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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.


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

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