Sistema SWOT and PESTLE Analysis

Strength

1. High growth companies dotting Sistema’s portfolio: With companies like MTS, Detsky Mir, Segezha Group, Agroholding "STEPPE", Medsi, Binnopharm, MTS Bank, RTI, BPGC, MTS Bank, Real estate and hospitality assets in its portfolio, Sistema is currently the major private investor in the knowledge intensive sectors of Russian economy.
Some of its companies are very strong brands e.g. in 2017, MTS trademark was the 9th most expensive Russian brand, with an estimated value $ 1,484 Million. This leading telecom operator in Russia and the CIS boasts of over 106.5 m mobile subscribers. Detsky Mir is the largest children's goods retailer in Russia with over 650 stores and Segezha Group - A major forest holding stands at #1 I Russia and @2 in Europe in paper sacks manufacturing. Kronstadt Group - one of Russia’s leading developers and manufacturers of high-tech products, Mikron featuring amongst Europe’s five largest fullcycle microelectronics producers, and the largest in the CIS and last but not the least - Concept Group - one of the largest players in lingerie wholesale and child wear monobrand store also deserve mention.. The company took many cost control measures so as to maximize its profit potential and as a result the SG&A/Revenue ratio at the corporate center decreased from 1.2% to 0.5% YOY, here SG&A consists of all those expenses which are not included in production e.g. management salary, office computers, etc.

2. Strong Cash Flow with reduction in costs: The company is currently in a strong cash position at the corporate center which have increased by 83% in 2018 (Quarter on Quarter). The inflows have been driven mostly by the dividends from MTS (amounting to RUB 19.3 bn) and non-public assets as well as asset monetization. The company has been able to reduce it liabilities by 6.7% mostly by its own funds. The group capex have decreased by 2.5%.

3. Creating new investment funds: Sistema is in the process of diversifying their sources of investment resources and remodel investment processes. Recently, it has made rapid progress in developing its venture capital and private equity arm. Sistema’s VC funds like Sistema Venture capital, Sistema Asia fund and Rusnano Sistema SICAR as well as other their investment platforms like Sistema finance and Sistema capital provide organizations and other investor’s access to exclusive asset base and proven time-tested investment strategies.

4. High Transparency in operations: A 2017 corporate study conducted by Russian Regional network for integrated accounting which covered 950 companies (80% of national income generation) revealed that Sistema is the 3rd most transparent private investment company in Russia and among top 10 among the public and strategic companies. Detsky Mir which is the children retail chain of Sistema is the leader in terms of transparency in the retail segment and won the Debut of the year category. Sistema also received the Russian Business Leaders: Dynamics and Responsibility award from the Russian union of industrialist and Entrepreneurs (RUIE) for the high quality of sustainability reports and was named in group A, which comprises 12 companies which had the highest individual scores in the responsibility and transparency index.

Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

1. Changing Consumer trends: India which houses the youngest population and is also the second largest data consumer in the world gives a huge opportunity to Sistema’s Cosmos chain to tap into. Indians are now increasingly shopping online, and have a very dynamic fashion and lifestyle market especially in the age group of 2-14 years. Cosmos have already opened up its flagship retail store in Noida by the name of ‘Acoola’, and have planned to launch 10 more stores in Delhi, Mumbai and Bengaluru. The Sistema Asia fund’s only focus currently is India as the Start-up program of the new government has accelerated the growth of start-ups in this country and companies like SoftBank (China), Walmart (USA), Google & Facebook (USA) are eying to have a piece of the new Indian ecosystem and thus it’s a great opportunity for Sistema to identify and acquire high growth projects to book future profits. It has already doubled its kitty for spending in Indian start-ups with about $120 million of funds. Some of the notable companies in which Sistema have already invested in India are: Wooplr, Healthify Me, Seclore, Qwikcilver, Netmeds.com, Licious, Lendingkart, and Mobikon.

Technological

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Legal

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Environmental

1. Development of environmental friendly as well as efficient products: Sistema’s wood processing company, Segezha Group have developed a biotechnological fuel production and a waste recycling project using biofuel. At techno park Sarov, the company has launched a manufacturing facility of injury – proof covering from improved characteristics from reprocessed car tires thus resolving a major issue of rubber recycling in its business. It has actively participated in training its employees of Leader Invest in energy efficiency and environmental safety at real-estate facilities. The company is connecting its employees and public to develop GREEN ZOOM city regulations for comprehensive and sustainable site development. The Segeza Group keeps doing campaign from time to time for promoting preservation of forest resources and reforestation.