PAVA, the first Russian grain processing company to float on the stock market, is in talks with potential foreign investors to fund plans to triple the amount of farmland under its control.

The father-and-son-owned company is considering selling shares through private placements as it pursues a tenfold increase in grain production by restoring vast tracts of fallow Siberian land, a company director said in a recent interview.

Galina Balayenkova, director for international business development, said large agribusiness companies, with higher turnover and less exposure to loans, would be able to expand despite the global economic downturn. "Expanding businesses might benefit from economic uncertainty," she said.

Farmers in Russia, the world's No. 5 grain grower, harvested their biggest-ever wheat crop last year after investing in the revival of a sector crippled by the legacy of collectivization and a decade of post-Soviet neglect.

The world financial downturn, however, has stalled growth in a sector heavily reliant on bank credits. Many smaller companies have defaulted on loans, prompting the government to pledge a record $3.3 billion loan package to secure another bumper crop.

PAVA has mandated BNP Paribas as adviser for financing its projects, Balayenkova said.

These projects include the possible sale through private placements of up to 40 percent of shares in Russian Agricultural Division, the PAVA subsidiary responsible for land assets.

RAD retains plans for an initial public share offering on a European bourse when the global economy shows signs of recovery.

PAVA, based in Barnaul, floated 10 percent of its stock on the MICEX in 2005. Pavel Igoshin and his son, Andrei, are the main owners of the firm, which began as a flour miller in 1996.

The RAD subsidiary controlled 166,992 hectares in the Siberian regions of Altai, Krasnoyarsk and Omsk on Jan. 1. It plans to raise this to 500,000 hectares by the end of 2010. The company produced more than 30,000 tons of grain last year, and it seeks to double output this year and reach more than 300,000 tons in 2010 by cultivating new land in Krasnoyarsk and Omsk.

Balayenkova said large agricultural holdings, which grow and process their own grain into food products, would be better equipped to withstand economic shocks than smaller enterprises. "Investing in vertical integration is an approach that is bound to pay off," she said. "To a large degree, this is fostered by the price of land assets on the Russian market -- cost is relatively low."

Balayenkova said the main challenges facing the sector were the replacement of obsolete machinery.

Most of PAVA's grain is used as feedstock for its processing division, Grainvest. The rest is sold domestically or exported, much of it by rail to Central Asia. PAVA's Mikhailovsky flour mill is only 30 kilometers from the Kazakh border.