Interview of the Director of “Armenbrok” Investment Company Aram Kayfajyan to Mediamax Agency and Banks.am portal

- The shares of “Artsakh HPP” underwent listing on the exchange and, finally, the first Armenian IPO can be considered a reality. What are your expectations concerning the exchange circulation of the company’s shares? 

- Listing of “Artsakh HPP” shares concluded the process, which lasted for about a year. The listing will provide the right of stock trading in the secondary market. We hope that these stocks will be more liquid, as compared to the securities of other companies, quoted on the Exchange, taking into account the fact that the stocks of “Artsakh HPP” were acquired by 1111 investors. Undoubtedly, there will be ones wanting to sell or purchase those stocks, as a result of which the market price for the stocks and circulation will be formed.

“Artsakh” HPP became the second company after “Armeconombank”, the stocks of which underwent listing in the exchange B platform.

- 5 962 074 stocks with the nominal value of 1000 AMD are quoted on NASDAQ OMX Armenia. What part of the authorized capital stock of the company was made public?

- If we take into account the fact that before the issue the authorized  capital stock of the company made about 5bln AMD, and after the issue it was replenished by 1bln more, one can establish that 1/6 part of the company’s capital is public.

This fact should make the company work more transparently, implement principles of corporate management and constantly keep the shareholders informed on the current processes in the company. By the way, “Artsakh HPP” has already formed a department for corporate management, which will deal with the given issues.

- During stock placement you noted that you prefer minor investors. What structure of investors did you get as a result?

-  The stocks of the company were acquired by investors from 8 countries. One of the new shareholders is a large institutional investor and the remaining ones are minor private investors.

Foreign investors consider the Artsakhi issuer more risky, so the overwhelming majority of the investors are of Armenian origin.

- “Artsakh HPP” plans a new placement of stocks in 2010. Will “Armenbrok” participate in the given process? And what are your expectations concerning the further promotion of the company in the capital market?

- Before the next placement, the company should yet prove to the current and potential investors that it works efficiently and that the attracted means provide for real compensation. Only in that case it will be expedient to carry out a new placement and “Armenbrok”, in its turn, is ready to assist that process.

During the initial public offering, only a part of the stocks was placed. This was accounted by the insufficient familiarity of “Artsakh HPP” in the society, as well as by the fact that the company was not related to the retail market.

Imagine if the IPO was carried out by companies, such as “ArmenTel” and “VivaCell-MTS”, which are very well familiar to the population of Armenia. Such a company, given a competently organized listing, only in Armenia will have about 1mln shareholders.

- The parent companies of “ArmenTel” and “VivaCell-MTS” are today quoted in leading world exchanges, and they are very well familiar with all the opportunities in the capital market. Why don’t they take up such a step in Armenia? Maybe they see certain risks in that?

-Not at all. There are no risks here. Maybe, it is simply inexpedient for them at the moment.

However, this does not mean at all that we should sit and wait for stirring up of the issuers and investors. I am absolutely sure that there should be a structure set up under the government, the main function of which should be stimulation of portfolio investments.

An analogous structure already functions in Georgia: it advertizes Georgia all over the world, explains how attractive the given country is for investments. Simultaneously, the indices of auspiciousness of starting and running business in Georgia improve. In general, the volumes of portfolio investment, attracted by Armenia and Georgia, are incomparable: if the investment companies in Armenia managed to attract all in all about $20mln of portfolio investment, the analogous index for Georgia makes over $1bln.

The Fund for stimulating investments should encourage companies to carry out issues of securities. Simultaneously, complex measures should be carried out to eradicate corruption and bureaucracy, which seriously hinder inflow of capital into Armenia. 

This complex process should be started with simplest measures, one of which, for instance, should be abolition of the entry visa order for Armenia for the citizens of the European Union, Japan, the USA and a number of other countries.

The Fund for stimulating investments should assist companies in elaborating investment proposals, place information on the given companies at its website.

- What would you advise companies, which consider the opportunity to attracting investments through issue of stocks?

- We see that the process of IPO is frozen all over the world, but in a number of developed countries they start registering indices, which exceed the level forecasted earlier, and this signals the start of the end of the global crisis.

I advise all, who have had an intention to enter the shares market, not to freeze the given process because of the global fluctuations, not to give up the idea of securitization, carry out corporate measures to increase efficiency, transparency and recognizability of the brand.

One should use the existing passivity to get ready for an IPO. The companies, which start the process now, will be the first, who will use the results of the global economic healing.

The resources, attracted through securities, are the most efficient ones and our experience shows that all companies, which have issued stocks, have undoubtedly benefitted from that.

- Indeed, in certain developed countries they already register economic growth, which evidences the fact that the global crisis is starting to back off. Can we, as a result of this, expect stirring up of foreign investors in the capital market of Armenia in 2010?

- I don’t think that in 2010 we will witness return and stirring up of foreign investors. Developed markets should first of all reestablish themselves and go up, after which the investors will start seeking cheaper markets. Meanwhile, we should necessarily form the offer. Before the global crisis, the unmet demand in the Armenian capital market made billions of dollars, and upon completion of the crisis, this demand will start occurring again.

So, companies, which intend to enter the capital market, should start preparing, and the governmental structures, in charge of market development and improvement of the investment climate, should take up significant efforts to improve the investment attractiveness of Armenia.

- Recently it became known that the government intends to carry out privatization with the help of the Stock Exchange.

- I can only express regret in connection with the fact that this is done only now, when companies, which are already not that attractive for investors, are subject to privatization.