Russian e-commerce leader Ulmart reports 50% sales increase in 2014, plans IPO in 2016

Ulmart, Russia’s leading e-commerce company, confirmed today its plan to go public next year in a yet-to-be-determined Western stock exchange, the company’s chairman and co-owner Dmitry Kostygin told Russian business daily RBC.

Ulmart is thus considering raising $1 billion or more in exchange for 25% of the company’s shares. Advisers for the IPO could be appointed in the next few months.

The company initially planned to go public in 2015, as announced in March of last year, based on a valuation of up to $3 billion. Obviously, the degradation of the international climate which followed the Ukrainian crisis led the company to postpone the operation. However, one year after this premature announcement, Ulmart has consolidated its leadership position on the still-growing Russian e-commerce market and believes it is able to present convincing figures to potential investors.

In spite of the currently negative attitude of many international investors towards Russia, Ulmart seems so confident that it is now considering a valuation of no less than $5 billion to $6 billion, based on a preliminary estimate by JPMorgan and Morgan Stanley.

In 2014, Ulmart outperformed average market growth with its sales revenues reaching $1.3 billion in 2014 (not including VAT), up 50% from the previous year, according to preliminary company estimates.

A fraction (up to 30%) of Ulmart’s sales is generated by what it calls “cybermarkets.” These are physical venues where customers may make their purchases on a computer with screens that display an almost unlimited virtual storage area — which leaves open the question of whether or not this part of Ulmart’s sales should be considered as online or offline sales. The company operates 27 such cybermarkets, with fast expansion throughout Russia’s regions.

In Ulmart’s “cybermarkets,” customers make their purchases via computer screens in a super modern environment.

The company initially focused on computers, home electronics and household appliances, which remain the main sources of revenues. However, the site’s catalog now displays virtually everything from perfume and cosmetics, to pet goods and car parts. Last year, Ulmart also began selling air tickets and hotel bookings as well as digital content, having invested more than $20 million in music platform Zvooq and e-book company Bookmate.

On the logistics side, Ulmart has three main dispatching warehouses, three urban fulfilment centers, 238 pickup points and a fleet of 170 vehicles.

The company hopes to continue growth this year in spite of the expected slowdown of the Russian e-commerce market. “Since the main part of our flat costs will remain unchanged, our EBITDA could reach 6% (6 billion rubles) and our profit 2% (2 billion rubles),” believes Kostygin. At current exchange rates, these figures would correspond to more than $90 million and $30 million, respectively.

Last year, according to a research study by East-West Digital News and Data Insight, the Russian online retail market increased by 27% in rubles (to 660 billion) but just 5% in US dollars (to $17 billion). These preliminary estimates take into account neither cross-border sales ($5 billion) nor hotel bookings.

Sources: Ulmart, RBC.RU, Daily Telegraph

• East-West Digital News publishes in-depth studies on the Russian e-commerce market, including a full set of market data and case studies on leading market players in the domestic and cross-border segments. To receive an executive summary at no charge, please contact us at [email protected].

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