London/Moscow, April 16 - Shares in Russian food retailer Magnit rose 7.4 percent on their London market debut on Wednesday after the $413 million listing was oversubscribed.
The share sale, which signalled a revival of Russian equity market activity, was 1.6 times oversubscribed, a source close to the offering said.
Magnit sold 9.72 million shares at $42.5 per share or $8.50 per Global Depositary Receipt (GDR), about 21.7 times its 2009 earnings of $1.96 per share.
The valuation put Magnit at a slight discount to top Russian supermarket chain X5 Retail Group, which trades at 23.2 times its 2009 earnings estimate.
The deal size would increase to $480.25 million upon the exercise of pre-emptive rights and the over-allotment option.
The Magnit deal should bode well for X5's upcoming fund raising plan after it acquired the Karusel hypermarket chain for as much as $970 million last week.
Analysts expect X5 to conduct a $1 billion secondary public offering to fund the buyout.
GROWING MARKET
Russia's food sector grew 32 percent last year to $191 billion, or $1,330 per capita, as more affluent Russians look for higher-quality goods in Western-style stores.
But the market is highly fragmented, with the top 10 players controlling just 12 percent. Russian retailers are rushing to expand their market share before global giants such as Wal-Mart Stores Inc., Carrefour and Tesco enter the fast-growing economy.
This week, Wal-Mart named Stephan Fanderl, an executive with German retail firm Rewe Group, to explore possible expansion into Russia and other emerging markets.
Citigroup predicts supermarkets will account for 20 percent of all grocery sales in the country by 2015.
Krasnodar-based Magnit generated $3.8 billion in revenues last year, with 1.3 percent of the country's food retail market. It plans to use the proceeds to open more stores.
By comparison, top player X5 posted revenues of $5.3 billion in 2007, with a 1.9 percent of the market.
Magnit's London share sale, at $8.50 apiece, represented a 6.8 percent discount to its average closing price over the past five trading days. Its GDRs closed at $9.13 on Wednesday.
Morgan Stanley lifted Magnit's target price by 19 percent to $50 per share or $10 per GDR in late March on the stronger ruble and improved margins.