Putin warns Rostec state-owned conglomerate against uncontrolled extension

Russian President Vladimir Putin warned the state corporation Rostec from endless and uncontrolled growth, Interfax reports.

"You cannot expand endlessly, without any control, and you need to understand exactly what the corporation is created for, where it should move, and in what parameters it should function, so that its work is optimal, effective, and competitive," Putin said, speaking at Rostec’s 10 year anniversary celebration.

The state corporation includes more than 700 enterprises, which comprise 15 holdings. Eleven of them work in the defense industrial complex, and four in the civilian sectors. According to the 2016 IFRS (International Financial Reporting Standards) report, Rostec’s revenues increased by 11%, to 1.266 trillion rubles ($ 21.37008 billion) and net profit decreased by 11%, to 88 billion rubles ($ 1.48544 billion). The value of assets, according to the corporation, by the end of 2017 reached 3 trillion rubles -$ 50.64 billion), and in 2009, slightly more than 1 trillion rubles. ($ 16.88 billion).

At the end of 2016, the final decision was made to merge UralVagonZavod into Rostec. On December 27th Putin signed the order approving it as a way to financially recover the enterprise then.

In March 2017, on Russia 24, on the In the Working Noon program, Sergey Chemezov (Rostec Corporation chairman) reported for the first time that the United Aircraft Corporation (UAC) could join in Rostec. According to him, the transfer of the UAC could be expedient, but "not today." Later, the Industry and Trade Minister, Denis Manturov, confirmed that this issue is not being discussed.

In November, Kommersant disclosed the details of the UAC transfer to Rostec. According to the publication’s sources, there was a presidential decree drafted to allow the UAC to merge into Rostec. The draft cites the transfer of 91.68% shares of the corporation, which are in federal ownership, with the remaining being retained by the former owners, among them, VEB (Vnesheconombank, a Russian government-owned development bank). The representative of the UAC refrained from commenting on the possibility of the corporation’s entering into Rostec.

Despite its bankruptcy procedures, Tractor Plants (CTP) and their civilian assets will also be transferred to Rostec by the end of the year, Kommersant reported in November. The state corporation already manages the defense division of the concern. CTP’s debts are more than 85 billion rubles ($1.4348 billion), Rostec reported in November.

At the same time, the state corporation is looking for investors for some of its enterprises. Speaking at the ceremony on the occasion of Rostec’s 10 year anniversary, its chairman, Sergey Chemezov, informed that in 2018 the corporation intends to put up a number of its holding shares for sale.

In February, as part of the first stage of privatization, Russian Helicopters (part of Rostec) sold 12% of their shares for $300 million to Middle Eastern investors with the help of RDIF (Russian Direct Investment Fund). In the second stage it was planned to sell another 12-13%. In May, it became known that Rostec was looking for an investor for UralVagonZavod. Kalashnikov was considered as the main applicant. In November, the state corporation announced that it was looking for an investor for the holding, High-Precision Systems. Rostec plans to sell 49% of that holding’s shares. The main applicant for the purchase is Andei Bokarev, the co-owner of Kalashnikov. And on December 5th, the government approved the sale of 26% of Kalashnikov’s shares to Rostec.

  Rostec, Putin, Russia