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Government might waive 25% DR limit for companies which conduct domestic IPOs

Vedomosti reports that at a meeting hosted by Elvira Nabiullina, the President’s Aide for the Economy, MICEX was asked to prepare a position paper on the framework under which those companies, which conducted their IPOs and obtained a primary listing on the local stock market, would be relieved of the 25% limit on the proportion of charter capital available for DR programmes.

To judge by the article, this is a fresh idea that is still at the initial stage of evaluation. The proposal is a creative way of introducing additional incentives for companies to choose the local market for their primary listings. That said, we think that the current DR limits have been proven to be, at best, irrelevant for the stated objective of enhancing the role of the local exchanges and, at worst, an impediment to developing the local market, fragmenting liquidity and distorting the cost of capital for companies where such limits have now become binding.

This initiative confirms that the policy stance on DR limits is geared towards removing them. That said, we would only see this as good news so long as half-measures do not delay the comprehensive lifting of the limits (for both new listings and existing ones). Updated guidance from the regulator on the timing for reaching that goal would be most appreciated. 

Alexey Zabotkin, Sergey Galkin, Ilya Piterskiy
VTB Capital analyst


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