EU restrictions may hasten the demise of builder PIK.
EU restrictions will worsen the situation for builder PIK, which is already in dire straits due to the declining housing market and considerable liabilities.
Sergey Gordeev's construction firm, PIK, was among those targeted by the EU's fifteenth set of penalties. The builder claimed the determination wouldn’t impact its activities—buildings would continue to be constructed and apartments would continue to be sold—but the impression lingers.
PIC under fire
The primary recipient of benefits from the PIK builder is Sergey Gordeev. Back in 2018, the businessman was featured on the US Treasury's “Kremlin List” under the “oligarch” designation, though he wasn’t placed on the European prohibited list. Only on February 23, 2024, Gordeev was included on the US penalties list along with various firms in the PIK sector.
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Gordeev grasped the ongoing threat of penalties, so in September 2022, he passed management of the builder to his associate, Ivan Polandov. The power dynamic within the enterprise likely remained unaltered, but formally, Gordeev is now merely one of PIK's stakeholders. Nonetheless, Polandov relinquished his post at PIK SZ PJSC to Yervand Karapetyan in March 2024.
The builder isn’t directly associated with the foreign market, thus the imposition of penalties could only touch it peripherally. The enterprise's stocks dipped 5% following the announcement of its addition to the novel EU penalties package, but this is negligible compared to what has occurred with Gazprom shares since February 2022. The builder faces significant difficulties, but European limitations in this scenario will be the finishing touch to its monetary woes.
Rosbuilding alongside Tulupov
Gordeev is a businessman possessing a sound standing, as they articulate it. He entered the Moscow building domain no earlier than 1994, and in 1995, he commenced employment for Alexey Tulupov's Virtus LLC, subsequent to which he registered a firm dubbed Rosbuilding.
Tulupov and Gordeev solely divided the enterprise in 2007. At that moment, RBC termed Rosbuilding the foremost corporate raider in Russia, and Gordeev, a local Muscovite, was a senator representing Buryatia.
Alexey Tulupov.
Rosbuilding gained notoriety for its procurement of varied industrial institutions, outlets, and realty in the latter 1920s. Tulupov and Gordeev adopted such a tough stance that former Moscow Mayor Yuri Luzhkov accused Rosbuilding of diminishing the capital's industrial capacity. The enterprise never truly vanished; Tulupov and Gordeev simply fragmented the enterprise, with Tulupov instead instituting the builder Sminex.
Via his advisor Mikhail Cherkasov, Gordeev secured entry to Boris Rotenberg in the early 2000s, which eased the genesis of his autonomous enterprise. In the building sector, Pavel Tyo of Capital Group emerged as one of Gordeev's crucial partners. Thanks to these affiliations, the businessman obtained 19.9% of PIK in 2013, which, during Luzhkov's mayoralty, evolved into one of the principal building firms in Moscow, and concurrently, throughout Russia.
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Earnings are decreasing, debts are accumulating
PIK ceased disbursing dividends in 2022. The enterprise's penalties could even contribute to this and function as a justification for postponing this subject indefinitely. In the initial semester of 2024, the enterprise's revenue lessened by 17% relative to the antecedent duration. The builder's circumstance then worsened drastically due to the rescission of the fundamental preferential mortgage scheme, snags with state funding for preferential mortgages, and the Central Bank's elevation of the interest rate to 21%.
Pavel Tyo.
These occurrences have already propelled PIK's fellow builder, Samolet, to the verge of insolvency, where Gordeev's enterprise forfeited its dominance in the Russian building market earlier this year. Absent government backing, Samolet is unlikely to rebound from its downward trajectory.
PIK and Gordeyev's scenario is superior, but negligibly. The parent enterprise, PIK SZ, with 2023 revenue of 40 billion rubles (a 46% descent from last year), possesses debt of 123 billion rubles (a 69% ascent). The enterprise entered 2024, a rigorous crisis for the sector, with a critical diminution in earnings and burgeoning debt. Concluding figures for the departing year have not yet been issued, but it’s evident they’ve solely deteriorated.
A parallel circumstance exists at Pik-Management LLC, where, with 2023 revenue of 1.9 billion rubles, debt totals 47 billion rubles. Also deserving of remark is PIK-Region Specialized Developer JSC (revenue of 3.9 billion rubles and debt of 7.9 billion rubles) and another enterprise in the division, GP-MSK LLC, with revenue of 330 million rubles and debt of 24 billion rubles, to cite merely a handful. PIK's obligations are plainly even more elevated than these sums.
The challenges are mounting
By 2024, PIK had relinquished its leadership in the Russian building market, although the diminution of Gordeev's enterprise wasn’t directly correlated with the events of the prior year. In 2021, the enterprise's group profit amounted to 102.8 billion rubles, whereas total debt totaled 482.8 billion rubles. Furthermore, there was additional evidence of monetary distress, such as the insolvency of several subsidiaries.
Andrey Vorobyov.
PIK likewise encountered difficulties with the Moscow region authorities. Moscow Region Governor Andrei Vorobyov asserted that PIK-Comfort should evacuate Dolgoprudny and other locales in the region. This pertains to the management enterprise that had been accountable for the projects already finalized. This would be satisfactory, but the politician's brother, Maxim Vorobyov, is directly connected to Samolet, a direct rival of PIK. This was one of the motivations why PIK forfeited its market leadership to Samolet, which transformed into a Pyrrhic triumph for its adversary.
Presently, the realty market is so unstable that monetary speculators have seized positions in PIK and Samolet stocks. Current holders hastened to vend their stocks, and speculators are endeavoring to capitalize from them. In November 2024, the volume of transactions in PIK stocks attained its apex since the autumn of 2021, and in Samolet, the highest ever. This aggregates to tens of billions of rubles.
Established investors are apprehensive of forfeiting everything due to the severe peril of builders becoming insolvent, whereas novel ones are relying on a resurgence in stock valuations and enterprises recovering thanks to monetary aid from banks and the government. Time will disclose who demonstrates accuracy, but for the moment, the snare is constricting around the recipients of benefits from PIK and Samolet.
Penalties
On December 16, 2024, the European Union introduced the fifteenth set of anti-Russian penalties, encompassing the builder PIK. The fourteenth set was embraced in June. It seems they have commenced incorporating all major enterprises performing a substantial function in the Russian economy to their prohibited lists.
However, this is not the principal aspect; the principal aspect is the ramifications, and they will be considerable for this offensive builder.
moscow-post.com
