MOSCOW- The Russian stock market's capitalisation has dropped by 5.5 trillion roubles ($69.6 billion) in just three months amid a standoff between Russia and the West over Ukraine, putting into doubt the prospects of initial public offerings this year.

Russia saw a renaissance in IPOs last year, with companies raising a decade-high $3.7 billion and bringing investment banks over $100 million in fees, according to Refinitiv data.

With high dividend yields and strong oil prices behind Russia's economic rebound, at least 10 companies from commodities to financial and retail sectors were looking to raise around $2 billion, bankers have said.

But growing tensions between Russia and the West over Ukraine's potential admission to NATO have sparked a massive sell-off of Russian assets in recent weeks, pushing the rouble to a 14-month low and yields on state bonds spiking despite strong economic fundamentals. 

The sell-off saw the capitalisation of Russia's main index, the rouble-denominated MOEX, lose around 26% since its October peak, according to MOEX Group data, effectively shutting the IPO window for now.

"We may forget about the spring (IPO) window," said Vladimir Tsuprov, chief investment officer at Russia's TKB Investment Partners with nearly $7 billion assets under management. "The market would need six to nine months to more or less recover... This means an autumn (IPO) window at best."

The rouble remained under pressure on Wednesday but Russian indexes, the dollar-denominated RTS index and rouble-based MOEX, were trying to regain some ground. 

"We had a few deals in the pipeline that we were looking to do just after the Russian holiday period was over, but given the turbulence in the market we had to postpone those deals," said Alina Sychova, head of capital markets at Sova Capital.



The retail sector was the surprising newcomer and became the darling of investors, a shift from years-long interest in energy names which dominate the economy, as citizens turned their attention to cut-price goods and online delivery amid the coronavirus pandemic.

As a result, Russia's retail sector alone raised $2.2 billion in equity deals last year, according to Refinitiv. Food retailer Vkusvill was among a flurry of consumer firms looking to tap the equity market in 2022, according to Reuters sources. 

But recent volatility has left large investors looking at blue chips as their best option, said Slava Smolyaninov, chief strategist at BCS Global Markets, as risk is too high to consider anything apart from well-known names.

"Why do they need to look further for something that is more expensive, that is new to the market with no track record" he said. "Probably the market needs to be another 30%-40% higher to list new shares."

Vkusvill said an IPO was still one of the possible strategic options for the company's development, but that it was too early to talk about concrete plans.

But for some, now is the time to buy.

"Extremely high commodity prices and the approaching end of the central bank's rate-hiking cycle are supportive for Russian assets," said Sergey Dyudin, chief investment officer at VTB Capital Investment Management.

"After massive sell-offs, Russian stocks and bonds look very attractive compared to global peers."

($1 = 79.0100 roubles)

(Additional reporting by Andrey Ostroukh Writing by Katya Golubkova; Editing by Krishna Chandra Eluri, William Maclean) ((; +7 495 775 1242;))