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By Bloomberg

Lenta Ltd., a Russian hypermarket operator, raised $225 million selling new shares for expansion as shoppers turn to low-cost food retailers amid slowing economic growth.

Lenta sold 35.2 million new shares at $6.4 apiece, according to a company statement, a 6 percent discount to the London closing price on Friday. The company’s Moscow-traded stock fell 0.5 percent to 397 rubles, while the benchmark Micex Index was little changed at 1,604.87 as of 11:31 a.m.

Retail chains offering economy formats are better positioned to compete for customers as Russia heads for recession amid sanctions over Ukraine and lower oil prices, Fitch Ratings analyst Tatiana Bobrovskaya said in an e-mailed note Tuesday. Lenta’s deal follows PAO Magnit’s share sale in February, which raised $143 million for Russia’s largest Russian grocery chain.

“In this harsh credit environment, the placement should resolve the company’s financing issues and ensure that aggressive expansion plans get underway, while keeping its leverage within a reasonable range,” Sberbank CIB analysts Mikhail Krasnoperov and Artur Galimov said in an e-mailed note.

Lenta’s shares are up 9 percent since the start of the year compared with a 15 percent gain for the Micex index. The ruble gained for a third day, climbing 0.4 percent to 58.5090.

Market Return

“This is a very good sign” for the Russian stock market, Alexander Losev, chief executive officer at Sputnik Asset Management in Moscow, said in e-mailed comments. “It’s hard to imagine a better industry for the start of companies’ return to the capital market. Lenta is not a state-owned company, not a financial, not a commodity producer.”

Lenta plans to open at least 25 new hypermarkets this year and increase its revenue by 34 to 38 percent, it said. Ulmart, Russia’s largest online retailer, plans to sell $1 billion of shares in an initial public offering in 2016 to fund expansion in the country’s e-commerce market.

Russia’s state wealth fund, the Russian Direct Investment Fund, was the anchor investor for the placement, and helped attract funds from Asia, the Middle East and from Western investors, Interfax said, citing a person familiar with transaction details it didn’t identify.