MOSCOW (Reuters) - The owners of Russia’s largest toy retailer Detsky Mir raised $355 million in an initial public offering (IPO) of shares priced at the bottom of the expected range, in a sign investors are making a cautious return to Russian assets.

The IPO was the highest-profile share sale by a Russian company since 2014, when Western sanctions over Russia’s annexation of Ukraine’s Crimea region combined with a slump in oil prices to bring most deal-making to a standstill.

Detsky Mir sold shares at 85 rubles apiece, the bottom of the planned 85-87 rouble range, and the book was covered 1.5 times, marking cautious interest in Russia despite western sanctions.

“Investors are not feeling that sure yet and want to have an iron guarantee they will make money on a deal,” a source with one of the banks organizing the IPO said, when asked why the offering priced at the bottom of the range.

The company said the sale raised 21.1 billion rubles ($355 million) for the selling shareholders - Russian conglomerate Sistema SSAq.L, which will retain a majority stake, and the Russia-China Investment Fund (RCIF).

The deal valued Detsky Mir, which is Russian for “Children’s World,” at 62.8 billion rubles. The stock will begin trading on the Moscow Exchange on Feb. 10.

“That’s a sign that investors are ready to look at Russia and buy. We hope that the market is reopening,” another investment banker who requested anonymity told Reuters.

The Russian economy returned to growth late last year after seven quarters of contraction, helped by a recovery in oil prices.

However, private consumption - the biggest driver of Russia’s economy in the past - has yet to pick up before it starts contributing to the wider recovery.

FILE PHOTO: Traders work on the floor of the Moscow Exchange in the capital Moscow, Russia August 24, 2015. REUTERS/Sergei Karpukhin/File Photo

“The economy is of course recovering. But is it going to be a massive recovery? No. Moreover, the recovery is dissymmetric, it’s only seen in the top quarter of the population, I think it’s a problem,” said Jacob Grapengiesser, a partner at investment fund East Capital Group.

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Andrey Shemetov, the head of the global markets department at Sberbank CIB, which is arranging the IPO, said investors spanned the globe. Around 25 percent were from the United States, around 35 percent from the UK, 20 percent from Europe, and the remaining 20 percent split between the Middle East and Asia, and Russia.

“An investor should be offered the future of a company, there is a growth potential. To push the price up, for it to fall by 30 percent later, is not acceptable for us,” Shemetov told Reuters.

A source close to the placement said there were “hedge funds, long-only investors including sovereign wealth funds” among the buyers and no single investor would take a dominant position.

Alexander Golovtsov, head of investment research at Uralsib asset management, said one could have expected a stronger demand, after Russia's MICEX stock index .MCX added 27 percent in 2016.

“The placement did not seem expensive to me... It’s possible that underneath, a not very high demand is behind the current levels of the (stock market) indexes),” Golovtsov told Reuters.

The deal could however encourage other Russian companies looking to tap equity capital markets.

Sources have said fertilizer producer Phosagro PHOR.MM is considering a secondary share issue this week, while Sistema has said it may list its agriculture business this year.

“Overall, appetite for Russia is changing for the better,” a source with a Western investment bank said.

RCIF, set up by sovereign wealth fund the Russian Direct Investment Fund and China Investment Corp, bought into Detsky Mir slightly more than a year ago and its internal rate of return on the investment exceeded 90 percent, it said.

RCIF sold a 10 percent stake, keeping a 13 percent holding, while Sistema AFKS.MM cut its stake to 50 percent plus one share from 72.57 percent.

Sales at Detsky Mir, a 70-year-old brand set up under Soviet rule, rose 30 percent last year against a fall of 5 percent in overall retail sales in Russia. It plans to open around 250 stores through 2020, including 70 in 2017.

“It’s a good company: people will always buy toys and Detsky Mir is a price leader,” said a Moscow-based fund manager who asked not be named.