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Detsky Mir Uses Loans to Open Stores After Delaying IPO

OAO Detsky Mir, Russia’s largest children’s goods retailer, is using loans to finance its plan to open as many as 50 stores this year after it delayed an initial public offering.

The company, controlled by billionaire Vladimir Evtushenkov’s AFK Sistema, today opened Russia’s largest children’s goods store at 7,000 square meters (75,000 square feet). The shop, in the Voyentorg mall in central Moscow, will compete with a similar-size Hamleys store that the U.K. retailer’s Russian franchisee has said it will open in December near the KGB building in the city.

Detsky Mir is relying on loans to fund expansion in Russia’s regions to strengthen its market leadership during an economic slowdown, Chief Executive Officer Vladimir Chirakhov said in an interview today. The retailer scrapped a planned IPO earlier this year on Russia’s tension with U.S. and Europe over Ukraine, three people familiar with the matter said in March.

“We have no problems with financing and can afford boosting the number of store openings,” Chirakhov said. Detsky is also “ready for an IPO as soon as the markets turn favorable” and several investors have expressed interest to buy into the company, he said.

The retailer boosted first-half sales 27 percent to 18.1 billion rubles ($502 million), as like-for-like revenue rose 18 percent, according to a company presentation released Aug. 25. Operating income before depreciation and amortization reached 3.9 percent of revenue. Net debt was 7.65 billion rubles at the end of June, or 2.1 times Oibda.

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