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Vladimir Yevtushenkov is enjoying a new lease of life. On the ropes a few years ago after a battle with state oil group Rosneft risked bankrupting his Sistema conglomerate, the 72-year-old Russian tycoon is now leading the way in a boom on the country’s long-dormant equity markets.
Sistema, whose main asset is Russia’s largest telecoms group MTS, is looking to list companies from agricultural producer Steppe and health clinic Medsi to pharmaceutical group Binnopharm Group, one of the main producers of Russia’s Sputnik V Covid-19 vaccine, and MTS’s bank.
The group’s recent success with other initial public offerings appears to have vindicated Yevtushenkov’s decision to reaffirm his commitment to technology investments after the state’s 2014 seizure of its controlling stake in oil producer Bashneft.
Ozon, an ecommerce site co-owned by Sistema, has doubled in value since going public last year, while paper producer Segezha’s revenue in its most recent quarter was up 45 per cent year on year following its own IPO.
Meanwhile, MTS, Sistema’s crown jewel, is joining a race to create a tech-based “ecosystem” offering customers everything from financial services to streaming entertainment.
“We used to live by . . . ideals of self-reliance and on our own funds. And we weren’t an investment company,” Yevtushenkov told the Financial Times. “Now, people understand that we don’t lose our own money and we won’t lose other people’s either.”
Though many of Sistema’s tech investments are years away from making a profit, Yevtushenko said they were balanced out by the traditional assets in its portfolio. “We’re not worried. If we screw something up with Ozon, then another business will pull us through. Our strength is that we’re diversified.”
Today, Sistema is co-investing with state banks and attracting further funding for its venture capital arm as it looks at future IPOs — made possible in part by a recent surge in Russian retail investors.
“The market is very unstable, bank deposit rates are close to zero, inflation is quite serious,” Yevtushenkov said. “So people are looking for safety in buying and selling equities, because if you guess right, it gives them much more income than from keeping their money in a bank. It’s like a drug. You get hooked and you can’t stop.”
Yevtushenkov, a former Soviet factory engineer, got his start at the dawn of Russia’s capitalist era trading oil and computers with colleagues from the Moscow mayor’s office. For years he was close to Moscow’s powerful then-mayor Yuri Luzhkov, though the two men fell out in 2004.
Unlike many oligarchs, Yevtushenkov has won plaudits from investors for his commitment to public markets and corporate governance, rarities in a country where boards are often ceremonial and shareholders pay themselves sky-high dividends.
Sistema is Russia’s largest publicly traded diversified holding company. Last year it made children’s goods retailer Detsky Mir the first Russian company to be owned 100 per cent through its free float of shares, although an investor has since built a 30 per cent stake.
Other oligarchs see Yevtushenkov as a bellwether for Russia’s business community, which is chafing against years of stagnant economic growth and dwindling consumer purchasing power.
Calls for reform have largely fallen on deaf ears as the Kremlin increased state control of the economy and sought to reduce companies’ reliance on western funding following US and EU sanctions over the Crimea annexation in 2014.
Yevtushenkov spent several months under house arrest that year on charges of illegally privatising Bashneft, which were later dropped. After a protracted legal battle and the intervention of President Vladimir Putin, Sistema agreed in 2017 to pay Rosneft, which bought Bashneft from the state a year earlier, $1.7bn in damages for alleged asset stripping.
Largely because of the Bashneft deal the conglomerate is about Rbs210bn ($2.9bn) in debt, a burden Yevtushenkov says has kept Sistema from reinvesting in its business.
The issue of corporate reinvestment became particularly poignant in Russia this year after Putin criticised companies for pocketing record dividends as ordinary people suffered during the pandemic. Then, as prices soared for staple foods such as grains — of which Steppe is one of Russia’s largest producers — Prime Minister Mikhail Mishustin blamed the rises on businessmen’s “greed.”
The pointed comments sent a chill through Russia’s business community. More than three-quarters of business owners fear unfounded criminal prosecution, according to a survey conducted by the presidential security service in May.
“We have always done what the president said without fail,” Yevtushenkov said of Putin’s remarks. “We practically didn’t pay any dividends because the business always needed money.”
US investor Michael Calvey, whose Baring Vostok private equity fund co-owns Ozon alongside Sistema, was given a six-year suspended sentence last month for embezzlement. The case against Calvey was widely seen as a sign of how Russia’s investment climate has taken a back seat to the security services’ priorities.
Yevtushenkov suggested those legal troubles were part of doing business in Russia. “I’ll be honest with you — I could have stopped investing. But I survived. I think Calvey’s a tough guy. He’ll survive and he’ll keep investing,” he said.
Yevtushenkov, who sees business as a “minefield”, has made peace with playing by the state’s rules.
“The state has the right to take any decisions that business might like or not like . . . There might be some unpleasant consequences for someone — there were for us. But that’s life,” he said. “Business should work for the good of the state. As soon as it loses sight of that, something unpleasant always winds up happening.”