In Russia, cash is king. That's what most consumers use to
conduct transactions in the country.
The problem is, it's not always convenient, or safe, to carry
around large sums of cash.
That's whereQiwi (
) comes in.
Qiwi is a leading provider of next-generation payment services
in Russia and the Commonwealth of Independent States. Its
applications let consumers use cash, stored value and other
electronic payment methods to order and pay for goods and
services across physical or online environments.
Its integrated proprietary network enables payment services
across physical, online and mobile channels.
The company has deployed more than 11 million virtual wallets
and more than 169,000 kiosks and payment terminals. More than
40,000 merchants accept payments from the system.
Consumers can use Qiwi applications for a number of
transactions, from buying mobile phone minutes and bus tickets to
conducting e-commerce transactions.
Qiwi is expected to make its initial public offering on the
Nasdaq this week. Its stock will trade in the form of American
Because of high demand for its services, many IPO experts
expect a favorable reaction from investors.
"As the world moves to more cashless transactions, these kinds
of systems are becoming much more prominent," said David Menlow,
president of IPOfinancial.com. "I think the company will do well
with its IPO because it comes to market with profitability."
It also comes to market with plenty of financial might.
Billionaire Alisher Usmanov's Mail.ru Group holds 21% of Qiwi
shares. Chief Executive Officer Sergey Solonin owns 25%, part of
the almost 60% controlled by the company's directors and
Solonin will keep about 25% voting control after the IPO, Qiwi
Qiwi also has a high-profile partner inVisa (
), the world's leading credit card processor.
In November, Qiwi and Visa formed an alliance, called Visa
Qiwi Wallet, that lets consumers access electronic payment
Under terms of the partnership, Qiwi will assist Visa in
providing new services to Visa cardholders while enabling Qiwi to
extend its kiosk and digital wallet services internationally.
"Visa helps them enter other emerging markets where people
don't know what Qiwi is," said Greg Leffert, a research analyst
at Renaissance Capital. "In the near term, they are looking at
Brazil. Longer term, they might look at Argentina, China and
According to its prospectus, Qiwi was incorporated as a
private limited liability company in February 2007 under the name
OE Investments Ltd. The company changed its name to Qiwi in
Qiwi has two main operating segments: Qiwi Distribution, which
gets most of its revenue from payment systems offered through
kiosks and terminals; and Visa Qiwi Wallet, which generates
revenue from payments processed through virtual electronic
accounts and bank prepaid products, including its prepaid card
The main source of revenue in both segments is fees Qiwi gets
for processing payments made by consumers to merchants, called
payment processing fees. These are based on a percentage of the
value of the transactions Qiwi processes, referred to as payment
The payment services industry is very competitive, and Qiwi
has a number of rivals that are bigger and have more financial
The list of rivals includes Sberbank of Russia, the country's
largest retail bank.
"One of the top concerns is the threat from Sberbank," Leffert
said. "There's a possibility they will develop their own kiosk
network, and they've already purchased virtual wallet
There is also talk ofeBay (
) subsidiary PayPal entering Russia as a direct competitor, he
Another risk is that Qiwi gets a big portion of its revenue
from a few large merchants, in particular Russia's three biggest
mobile network operators.
Last year, Qiwi reported revenue of $293 million. The vast
majority of that -- 85% -- came from payment processing fees.
Most of the rest came from advertising revenue.
Qiwi's cost of revenue for the year totaled $175.6 million.
Transaction costs accounted for 83% of the total.
The company recorded shareholder profit of about $30
USE OF PROCEEDS
Qiwi expects to raise about $100 million from its initial
public offering. According to its prospectus, the selling
shareholders will receive all of the net proceeds from the sale
of the shares offered.
Shareholders might also decide to use some of their money to
finance expansion into other markets.
An entrepreneur with more than 14 years of experience in the
payment services and banking industries. Co-founded OSMP JSC, a
payment terminal operator. Worked there from April 2009 through
October 2012, when he took over as CEO of Qiwi.
Chief Operating Officer
Took over as COO in August 2012. Previously worked as CFO of
Mail.ru. Has more than 15 years of experience in finance and
accounting, including stints at Arthur Andersen and Ernst &
Chief Financial Officer
Has been CFO since October 2010. Previously served as
executive director at OSMP from October 2008 to October 2010.
From December 1999 until October 2008 he held numerous positions
with e-port, including commercial director.
JPMorgan Chase and Credit Suisse
$16-$18 per ADS
week of April 29-May 3