Clare Nuttall in Bucharest -

Sofia-based Sirma Group Holding plans to launch the first major post-crisis IPO on the Bulgarian Stock Exchange on September 16.

The upcoming IPO of Bulgaria’s largest IT group is partly a sign of reviving confidence in the Bulgarian stock market as well as the strength of the hi-tech sector. The large amount of cash currently available in the market, especially after depositors were recompensed for the collapse of Bulgaria’s fourth largest bank Corporate Commercial Bank (Corpbank) in 2014, is also a factor. 

The IPO will take place through a capital increase of 16mn new shares. The price range per share has been set at BGN1.20-1.65 (€0.61-0.84). A price at the upper end of the range would result in proceeds of up to BGN26.4mn (€13.5mn) and a market capitalisation of more than BGN100mn (€51mn). Local outfit ELANA Trading is both the lead manager and adviser for the issue.

Sirma comprises a group of IT companies including systems integration business Sirma Solutions, CAD package design company EngView Systems and semantic technologies developer Ontotext, whose platform is used by the BBC and Financial Times websites. Other international customers of Sirma’s technology include the Canadian government, the Pentagon and the Metropolitan Museum of Art in New York.

New horizons

Sirma was founded in 1992 by “a bunch of friends and university students”, says the group’s CEO Tsvetan Alexiev. “That was some 23 years ago and I cannot say we have seen it all, but everyday we strived to be better at what we do.”

Today, Sirma employs around 300 software engineers and other IT professionals, and has opened offices in Europe and the Americas. It remains based in Bulgaria, a country that has become an important location for both domestic and international IT companies along with other CEE countries such as Poland and Romania. Multinationals including HP and IBM operate in the country alongside Sirma and other homegrown businesses, attracted by the skilled workforce and relatively low costs.

Funds raised through the IPO will be used to further grow the company, penetrate new markets, and invest in research and development. “We are now looking into Asia and the Middle East as potential markets,” Alexiev says.

Previously, Sirma grew mainly by reinvesting its profits and raising bank finance, although Ontotext has attracted venture capital funding from Sofia-based New Europe Venture Equity (NEVEQ), and Alexiev is keen to secure more venture capital investments for Sirma companies in future. “I think more and more we will be looking into this option to attract additional capital and strategic partners onboard,” he says.

It is almost eight years since engineering and construction company Enemona listed on the Bulgarian Stock Exchange, raising BGN33.6mn in the country’s last major IPO before the global financial crisis swept through the region.

If successful, the Sirma IPO is likely to stimulate activity on the Sofia exchange and encourage more local companies to go public. According to Miroslav Stoyanov, head of investment banking at ELANA Trading, Bulgarian institutional investors currently have over BGN7bn under management, and their assets are steadily growing. “Even more cash is available after the collapse of the fourth biggest bank in Bulgaria, as a lot of the depositors have received their state guaranteed funds [up to €100,000]. Thus one of the prerequisite for the tide to turn in the local market is present. Confidence is restored slowly, however, and we believe Sirma’s IPO could be the first step towards that goal,” Stoyanov tells bne IntelliNews. “A successful IPO will once again bring attention to the Bulgarian capital market not only from local and international investors but also from companies looking to grow.”

Stoyanov has observed a lot of investor interest since the announcement that Sirma was planning an IPO, and reports that ELANA has held several meetings with other potential IPO candidates that are waiting for the outcome of the Sirma listing.