In this three-page report, we profile five Russian leasing
companies that are making headway in a unique marketplace
Russia’s largest lessor, Rosagroleasing, makes profits despite
being state integrated
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With the full backing of the state, it’s not surprising JSC
Rosagroleasing is the largest leasing company in Russia.
As at 30 June 2007, the lessor to the Russian agricultural
sector reported assets of RUB38.7bn (€1.07bn) and operating profit
of RUB225.8m (€6.1m).
RAL receives direct funding from the federal budget and was
formed in 2001 with the aim of providing support to the
agricultural sector by leasing equipment, machinery, component
parts and livestock. RAL is wholly owned by the Agency of Federal
Property Management.
Given the developmental role it has to play, RAL is the dominant
provider of leasing services, with a 70 per cent share of the
agricultural sector.
The Russian government has also imposed limitations on RAL’s
operations. For example, the list of equipment suppliers are
restricted to only those approved by the Ministry of Agriculture –
the Minister of Agriculture, Alexei Gorgeyev, is head of its
supervisory board. Furthermore, its commercial objectives are
stripped off, with limits placed on the amount of profit it can
make. According to a ratings report by Fitch Ratings, the federal
leasing interest margin is set at 3.5 per cent of residual lease
assets.
RAL’s activities cover several areas of federal leasing in
Russia. One is National Priority Project in agriculture (NPP)
leasing, a state-backed initiative that is associated exclusively
with livestock and cattle-breeding equipment. Food security became
a national priority after a severe decline in livestock production
in the 1990s led to an escalation in the food-import bill. In
September 2005, former President Vladimir Putin launched the
Agroindustrial Complex under the NPP, which set dairy and meat
production targets.
The other two types are ‘commercial unit’,in which agricultural
equipment leases are offered for up to three years, and investment
leasing, which involves the finance-backed purchase of equipment by
local and foreign manufacturers. Overall, NPP leasing is expected
to remain RAL’s priority up to 2012.
For the most part, RAL has been funded mostly by equity
(government federal budget allocations), but, since 2005, it has
turned to market sources to fund its commercial unit and investment
leasing activities.
In 2006, it received a five-year, €100m credit line arranged by
Rabobank, while its commercial unit is financed by Sberbank and the
Russian Agricultural bank. Fitch reports that, in 2008 and 2009,
RAL plans to raise €300m from several Western banks.
Its predominantly government-financed capital structure renders
RAL a very low-leveraged entity, which explains its low reported
return on equity (1.6 per cent as at June last year).
Still, any profit at all is commendable for a state-owned
institution, the priority of which is to provide cheap finance to
Russian farmers.
