EPAM Systems sold Russian business to Interros structure
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EPAM Systems has completed the sale of Russian assets, which was announced back in September 2022. The buyer was the Reksoft group, 20% of which belongs to the structures of Vladimir Potanin. The terms of the deal do not include a buyback option. According to Kommersant, Reksoft attracted credit funds to pay. Analysts estimate the value of EPAM’s business at RUB 10–15 billion, but admit that under the current conditions, the deal could have been significantly less. According to market participants, for the last year EPAM has been relocating developers and completing old contracts.
EPAM Systems sold Epam Systems LLC to the Reksoft group, Interfax reported, citing data from the Unified State Register of Legal Entities. This information was confirmed by Kommersant in Reksoft. They specified that the group acquired 100% of RNT Group, which is the copyright holder of Epam Systems LLC. Under agreements with EPAM Systems Inc., the group may not use the EPAM brand. The terms of the deal do not contain a buyback option, its amount is not disclosed. A Kommersant source in the IT market claims that Reksoft has attracted credit funds.
EPAM was founded in Minsk in 1993, later the company’s headquarters was moved to the USA. The company develops software and digital platforms, is engaged in consulting, offices are located in more than 40 countries. Sales volume in the second quarter fell by 2.1%, to $1.17 billion, net profit grew 6.5 times, to $120 million.
In April 2022, the parent structure announced its withdrawal from the Russian market, and an agreement on the sale of assets was signed on September 7. The parties failed to meet the deadline, the terms of the agreement were revised at the beginning of the year, EPAM reported in February.
According to EPAM, the sale of the Russian business was completed on July 26, and the company expects to record a loss on the sale of approximately $18.4 million in the third quarter. This includes the recognition of an accumulated foreign exchange loss attributable to the subsidiary, which is now included in other comprehensive loss .
Epam Systems LLC registered in 2001. In 2022, the company reduced its revenue by 47.6% to RUB 15 billion. The company received a net loss of 3 billion rubles. against a profit of 5.5 billion rubles. in 2021. EPAM’s clients in Russia included VTB, Gazprom Neft, S7, Pulkovo, Russian Post and other major Russian companies. According to the CEO of RNT Group, Yevgeny Grachev, the company worked with “the largest Russian corporations, including those with state participation”: “The share of this market segment in the client portfolio was about 85-90%.”
“Reksoft” (Reksoft) is a Russian developer of digital solutions for the financial sector, the public sector, retail, transport, logistics and other industries. In April 2022, Interros received 20% in the company. The main shareholders are the founders of the company: Alexander Egorov, Viktor Kozlov and Dmitry Rudakov. At the end of 2022, the group’s revenue increased by 15.8%, to more than 1.73 billion rubles.
EPAM primarily specializes in solutions related to the use of cloud technologies: migration to the clouds, creation of data platforms, machine learning and ML-OPS (mainly on Azure and Amazon platforms), Evgeny Romanenko, director of S + Consulting, explains: “ After the introduction of sanctions, it became impossible to sell such solutions to Russian customers, including due to difficulties with making payments and receiving funds. Therefore, over the past year, the company has been relocating developers and actually completing old contracts.”
Through the deal, the parent EPAM “insures itself against accusations that it has interests in the Russian Federation, and completely breaks off any relations with old Russian clients,” says Evapps managing partner Ruslan Ishmukhamedov.
The relocation of the majority of EPAM employees could negatively affect the quality and volume of development in the company, in this context, the deal with Reksoft will have a positive impact on relations with clients, help restore the reduced staff, strengthen expertise, says s20 Capital investment analyst Andrey Sharlay: “Without complete information we can estimate the value of the company using classical methods in the range of 10–15 billion rubles.” However, he clarifies, taking into account additional circumstances (reduction of assets and staff, as well as the desire of the owners to sell the asset), the amount could be an order of magnitude less.
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