The rapid growth of Russia's IT sector is attracting foreign investment houses with the promise of double-digit returns, in particular in the area of online retail.
The rapid growth of Russia’s IT sector is attracting foreign investment houses with the promise of double-digit returns, in particular in the area of online retail.
JP Morgan Asset Management is one that has entered the field, acquiring a stake in Russia’s online fashion retailer Lamoda through a Germany holding firm, according to news agency Interfax. The size of the deal is not disclosed.
JPM’s portfolio manager Robert Cousin said “Lamoda is in an excellent position to capture the rapid growth of Russia and its adjacent markets.” The firm is looking to expand its product and brand range, and its regional presence outside Russia, to Ukraine, Kazakhstan, Azerbaijan and Belarus.
The online store launched 18 months ago with the support of Rocket Internet, a European incubator for internet start-ups managed by four founders: Dominik Picker, Florian Jansen, Burkhard Binder and Niels Tonsen.
Overall, investments in the IT sector are increasing, with the industry forecasting over €300m of new investments this year alone. Regular internet usage among the Russian population continues to grow, with an estimated 60m unique users online.
A key driver of the online success is consumption, which is growing strongly. Last month’s accession to the World Trade Organisation will boost this further, experts say, as wages across the country rise, increasing spending power. Other experts add, however, that online retail opportunities may be stifled by lack of infrastructure, suggesting the sector is in need of capital to boost its growth potential.
Russia’s own investment houses also see value in internet start-ups. Examples include Tinkoff Digital, a company created by Russian businessman Oleg Tinkov this summer to invest in internet projects, and a venture fund formed by Sberbank Ventures back in February to invest in technology projects.
Most recently, Russia’s Financial Group Life formed a $10m venture fund to invest exclusively in mobile and internet finance-related projects, seeing particularly strong growth opportunities in this field.