Listing of the sixth issue of coupon bonds of the largest construction material producer in Armenia – “Shen Concern”- took place on “NASDAQ OMX Armenia” Stock Exchange. The listing volume was 1.5bln AMD. It replenished the fourth and the fifth issues in circulation on the Stock Exchange. And this takes place against the background of general indifference towards the Armenian capital market. Chairman of the Company’s Board of Directors Samvel Beglaryan spoke about ambitions of “Shen Concern” in Armenian capital market in an interview to Mediamax and Banks.am portal.

- Why is the issue of bonds more preferable for the company than a bank credit?

- We are interested in developing capital market in Armenia, since our goal is to hold initial public offering of stocks (IPO). And in order to carry out a successful IPO, the country needs long money. Another stimulus for development of capital market will be the pension reforms, in particular, introduction of the voluntary accumulative component since 2011. Our task is to start working with long money. The repayment term for the latest issue is 3 years. The next issues of our bonds will circulate longer (4-5 years).

We also very much want “Shen-Concern” securities to spread widely in business and among the population. During the negotiations with “VTB Bank (Armenia)” [the bank purchased the entire sixth issue of the company’s bonds], I personally asked them to place our securities with various enterprises, insurance companies and individuals after the REPO operation. I remember that during redemption of our second issue, many individuals were coming to our cash-desks to receive their sums, and this is very good.

- Despite the tendencies of post-crisis stabilization, observed in the financial system, the yield of “Shen-Concern” bonds increases with each issue: the yield of the fourth issue made 11%, the fifth – 12.5%, the sixth – 13%. What is this fact conditioned by?

- This is conditioned by the crisis influence, and, as a result, by increase in the cost of money. The yield of governmental bonds today even exceeds 14%. I want to note however, that reduction in price for credit resources is already obvious in the market, and this tendency will continue. I start noticing serious competition among banks: all of them are in active search for ways to efficiently place their financial means.

- It is notable that the entire sixth issue of bonds was purchased by one institutional investor – “VTB Bank (Armenia)”. Was there any preliminary agreement reached with the bank?

- No, but we received offers from a few banks, and the most attractive of those offers was the application of “VTB Bank (Armenia)”: the fact is that we needed the sum, raised as a result of the bonds placement, immediately and fully and the mentioned bank met this requirement.

The resources, attracted as a result of the placement, will be spent for realization of a large and unprecedented project in our region: gypsum extraction and production of three types of products on its basis. Those products have not been produced in Armenia yet. Here we speak of producing gypsum block, gypsum boards, and gypsum plaster. The factory will work exclusively on German equipment. We would also like to note that in particular the gypsum plaster will make a revolution in the process of interior finish of premises: it will not be applied manually, but will be blown on the walls with the help of special machines, which will reduce the finishing process time a few times. The factory is being built in cooperation with the European Bank for Reconstruction and Development (EBRD) and will start functioning in mid 2012.   

- It is known that besides Armenia, the company will sell its production in Georgia, where they are also getting ready to start production activity. Can you speak of the company’s intention on the Georgian market and on how Armenian capital “feels” in the neighboring country?

- We founded a plant on producing glue and glazed tiles in Georgia – Shen Georgia. It will start functioning in late January, 2011.

The initiative to build a factory in Georgia occurred when we learnt about the intentions of one Turkish company to develop analogous production in Georgia and export their production to Armenia among other countries.

We hurried and decided to enter the Georgian market before they do, by building a factory, which does not have its analogy on the territory of Georgia. We realize this project in cooperation with two partners: one of them is a Georgian company, and another is the Armenian developer “Elite Group” CJSC. Our share in the factory makes 35%.  

South of Russia is among sales markets for factories, being built in Georgia and Armenia, where construction of Olympic objects is in its full swing.

Concerning business climate in Georgia, it is really very easy to work there. The plant was built in a very short time. I should note however that there is one fact, which causes concern: there is absolutely no control over construction and no one monitors for instance whether the building being built is quakeproof of not. It is comprehensible that this is done in order to rule out corruption and bureaucracy, however, such style of work contains big risks in it.

- It is clear from the reporting of “Shen Concern” that the indices of the company still yield to the level of 2008, but have already significantly exceeded the indices fro 2009. What is your assessment of the company’s financial results for 2010?

- In 2010, we almost reached the indices of 2008. The profit following the results of the year, according to our estimations, will make about 300-500mln AMD. Next year we expect abrupt growth of profit, taking into account significant export growth.

- When does the company intend to carry out IPO?

- We want to do that when the trade turnover of the company nears USD 80mln. According to our estimations, this will take place in 2015-16. Aiming at competently organizing the IPO, we already work with EBRD.

- What was the influence of last year’s decline in construction sector and the decline of demand and prices for real estate on the company?

- As a result of the crisis, our trade turnover reduced by 30-40%. Nevertheless, I see a number of positive factors in passivity of the market, since numerous unfair developers have left the market. As a result of the crisis, 3-4 serious developers are left in the market.

At present, there is active reestablishment of demand for real estate observed and construction again increases. Now there are expectations for reduction of price of money and the financial means will again start actively being invested in real estate.