Ozon, one of the leading Russian e-commerce companies, intends to raise several hundreds of million dollars in equity next year to support new investments in logistics and IT, East-West Digital News (EWDN) reports.
As these plans were aired in the Russian media by the company’s general director Alexander Shulgin, an unnamed source told Kommersant that Ozon wants to raised “more than $200mn.” In an exchange with East-West Digital News, the company’s press service, while confirming Ozon’s intention to attract new funding, declined to specify the amount sought.
The capital injection may come from Ozon’s existing shareholders, among, which are Baring Vostok, a major Russian PE firm, the conglomerate Sistema and its affiliates, and mobile operator Mobile TeleSystems (MTS).
While a Baring Vostok representative stated that the firm’s funds “will continue to support actively Ozon in its development,” Sistema and MTS declined to comment on Ozon’s investment plans.
Alternatively, Ozon may attract funding from new investors. To this end, the e-commerce company has hired Morgan Stanley, reported Kommersant.
This investment bank recently published a report that underlines the important growth potential of the Russian e-commerce market – from $18bn last year to some $53mn by 2023 for physical goods.
“Now the company is growing by 70-80% year-on-year – but we could grow more than 100%, the only thing holding us back being logistics,” Shulgin wrote in an exchange with East-West Digital News. “We prefer investing to accelerate development right now in order to take our part in the [predictable] market consolidation and increase our share several times over the next 2-3 years.” An IPO is “not excluded in the future,” the CEO added, but to attract public investors in the best conditions, Ozon wants to increase its revenue and business scale “at least 3-4 times.”
An industry pioneer facing growing competition
Ozon was founded in 1998, with an initial focus on books, CDs and DVDs. The site enlarged its positioning in the mid-2000s – following the example of Amazon – with consumer electronics, cameras and mobile phones and later added children’s goods and travel products.
Ozon launched Ozon Travel in 2009; acquired Sapato.ru, a major online retailer of shoes and accessories, in 2012; and took control of Litres, the Russian e-book leader, two years later. The company has also developed an in-house fulfillment and delivery network, which encompasses several hundreds of cities in Russia.
With giant capital injections in 2011 ($100mn), 2014 ($150mn) and 2018 (up to $92mn), Ozon is one of the most well-funded Russian e-commerce companies. The company’s valuation in the last round amounted to $814.2mn, according to Kommersant.
However, additional funding will arguably be necessary to resist growing competition. Mail.Ru Group has made an alliance with Alibaba to create an ambitious e-commerce and social communications platform, while Yandex’s e-commerce projects have been backed Sberbank, which has put $500mn in their joint-venture.