Russian Netflix ivi raises $250mn in new capital, IPO could still be considered

Russian Netflix ivi raises $250mn in new capital, IPO could still be considered
By bne IntelliNews May 26, 2021

Russia's largest online cinema ivi has announced closing a new funding round of $250mn from both external investors and current shareholders, making it one of the largest private equity deals in recent years.

The group of new investors was led by Russia's second-largest bank, VTB Bank, and includes Invest AG and Millhouse, while Flashpoint Venture Capital, Baring Vostok and the Russian Direct Investment Fund (RDIF) were among the current shareholders who participated in the raise. 

As followed by bne IntelliNewsRussian video streaming platforms are gaining speed and saw a jump in subscriptions and spending on paid content amid the coronavirus (COVID-19) lockdowns. 

The Russian legal video streaming market in 2020 went up by record-high 66% year on year to RUB28bn ($0.38mn), 

As a result of the latest funding round, VTB Bank will become one of ivi’s largest shareholders, alongside Baring Vostok, RTP Global and Flashpoint, and will be represented on ivi’s Board of Directors. The company's press release did not specify the new shareholder sctructure.

According to the sources of Kommersant daily, the existing shareholders have contributed over 30% of the financing round, while most of the investment came from new investors such as Invest AG and Millhouse of Russian billionaire Roman Abramovich.

ivi commented that the funds raised would be used for acquiring and developing new content and solidifying online cinema's leading market position. But analysts surveyed by Kommersant note that VTB Bank participating in the latest private equity round points to interest in a potential IPO in ivi.

Previous reports indicated that ivi was considering an IPO on NASDAQ by the end of 2020, with a valuation of $0.8bn-$1bn. The company already reportedly submitted the paperwork to the Securities Exchange Commission (SEC), but the offering was called off due to the bill that limited foreign ownership in online audio-visual services to 20%, Kommersant claims.

Since the botched IPO, the company has got a new CEO, Ivan Grodetsky, the former head of rival Okko. ivi has also reinforced its team with Yury Smagarinsky and Maria Grechishnikova, former top managers of Veon mobile major (sales and client services) and Star Media production company (sales and international projects).

ivi remains the top online video streaming platform in Russia with an over 30% market share (according to TMT Consulting data for 2020). The streaming service audience exceeds 50mn unique monthly users.

Notably, as followed by bne IntelliNews, Russia's largest bank Sberbank intends to invest heavily in Okko to make it the market leader by 2021.

Some minor services such as Start posted a 2.7-fold jump in revenues in 2020, while still having a relatively small market share. Russian mobile major MegaFon bought into Start in October 2020 and said it plans to invest RUB5bn ($63.3mn) in the service in the next three years

Other competitive challenges come from mobile operators such as Veon (Megogo platform), as well as from Netflix's entry to Russia. 

TMT expects the market to increase by 42% in 2021 to RUB39bn, while the analysts surveyed by Vedomosti daily previously believed that the growth could amount to 50%-55%.