©Bloomberg

Rough diamonds mined by Alrosa

Russia’s government has sold a 10.9 per cent stake in diamond miner Alrosa for Rbs52.2bn ($814m) as part of a privatisation programme aimed at plugging the country’s budget deficit.

Investors paid Rbs65 a share for a stake in the world’s largest diamond producer, according to Dmitry Pristanskov, director of the Russian federal property agency that owns state assets.

One person close to the share placement said the Russian Direct Investment Fund, a fund that promotes inward investment, acquired about half of the Alrosa stock sold by the government, in partnership with Asian, Middle Eastern and western investors.

More than 100 investors bought stock in the placement, according to Andrei Shemetov, head of global markets at Sberbank CIB, lead manager on the deal.

Russia, a leading oil producer, has been hit hard by the plunge in crude prices since mid-2014, and the government is selling stakes in state-owned companies to plug the hole in its finances.

“Without privatisation deals it would be difficult to finance the budget deficit,” said deputy prime minister Igor Shuvalov.

He added oil producer Bashneft and shipping company Sovcomflot would be partially privatised later this year. Rosneft, Russia’s largest oil producer, could follow.

Other companies, whose leaders met president Vladimir Putin when he announced the privatisation programme in February, including Aeroflot and VTB Bank, are not expected to go to market until next year, if at all.

With the exception of Bashneft — which was controversially renationalised in 2014 as its oligarch owner was placed under house arrest — the government does not intend to surrender controlling stakes in privatised companies, said Alexei Moiseev, deputy finance minister.

Alrosa, which operates enormous mines in the far eastern region of Yakutia, is a bellwether for the privatisation programme’s success in the face of US and EU sanctions over the Ukraine crisis.

Sberbank and VTB, whose investment arm co-managed the deal, are among the companies affected by the sanctions.

The Alrosa deal did not fall foul of the sanctions, which limit certain Russian companies’ access to western capital markets.

However, the US government has expressed concerns that the privatisation programme could be used to finance Russian companies affected by the sanctions.

Russian and European investors each bought about a third of the Alrosa shares available in the placement, said Boris Kvasov, director of equity capital markets at VTB Capital. Middle Eastern and Asian investors bought 20 per cent of the shares, and US investors five per cent, he added.