Russian entrepreneur launches $750 mln credit card IPO

Reuters

* TCS to raise $150-$200 mln to grow its retail business

* Tinkov to reduce stake, but keep a majority

* Consumer lending growing despite economic slowdown

By Megan Davies

MOSCOW, Oct 3 (Reuters) - Russian entrepreneur Oleg Tinkovhas launched a London stock market listing for his credit cardbusiness TCS to raise up to $750 million, seeking to convinceinvestors that households will continue to pile on debt despitean economic slowdown.

Unsecured lending to Russian households grew by as much as50 percent last year as the country's emerging middle classdemands more consumer goods and banks rush into a profitablemarket to offset weakening demand for credit from companies.

"The economy has slowed a little but there is still verystrong consumer demand," said TCS CEO Oliver Hughes. "Retail isstrong. This is just the right time to do an IPO - we have asolid track record behind us. We have massive growth to come."

Household indebtedness in Russia, at 12 percent of grossdomestic product, is much lower than in most developedeconomies, with countries such as Britain seeing a percentage ashigh as 100 percent.

Small entrants like TCS Holding Group, owner of TinkoffCredit Systems which was founded by the blonde-haired andcharismatic Tinkov, have challenged state-controlled lenders andgrabbed market share in the high-margin business.

"TCS has a history of growth," said Uralsib analyst NataliaBerezina. "It is slightly different to those already on themarket - universal banks which have a large share of corporatebusiness, and, of course, with a lower rate of growth."

But she said that was a double-edged sword, as it meant TCScould be more exposed to a potential slowdown in consumerlending.

Worried that the boom may end badly, the central bank hasinstructed banks to increase provisioning against retail lending- especially the high-interest point-of-sale loans many Russianstake out to pay for discretionary items.

However, Hughes said moves by regulators to raise thebarriers to entry would help specialist lenders such as Tinkoff.

CREDIT CARDS BY COURIER

TCS says its market share of credit card loans is 7.7percent, while it has a net loan portfolio of nearly $2 billionand more than 3.5 million credit cards issued. Net profit forthe six months to the end of June grew to $79 million from $52million the same year a year earlier, it added.

The firm credits its growth to a branchless model where itdelivers credit cards by courier to far-flung regions such asKamchatka, Sakhalin island, the North Caucasus and Siberia.

The initial public offering (IPO) would allow it to grow itscore retail lending while developing other business lines suchas payments and insurance, it said. The company will raise about$150 million to $200 million from the sale of new shares in theform of global depositary receipts (GDRs).

The offering will also allow Tinkov, who has a 61 percentstake, to sell down some of his shares, although he will remainmajority shareholder.

It will give the company's private equity backers - VostokNafta, Goldman Sachs, Baring Vostok and Ukraine's HorizonCapital - a partial exit as well.

Goldman Sachs' private equity unit bought a 15 percent stakefor $20 million in 2007 when the group was battling thefinancial crisis. Tinkov sold another 15 percent stake in 2008to private equity fund Vostok Nafta, for $30 million.

TCS did not say how many shares it would sell in total, orprovide details on its potential valuation.

The listing will come alongside other offerings by Russiancompanies. The government is to sell a stake in diamond minerAlrosa on Moscow's bourse, while hypermarket chain Lenta,part-owned by U.S. private equity firm TPG, is expectedto go public next year.

The roadshow for the TCS offering will start on Oct. 14 withpricing on Oct. 25, two market sources said. Hughes said TCS wasanticipating a wide investor base including technology-focusedfunds, financial technology funds as well as emerging marketfocused investors.

Prior to supplying credit cards, Tinkov built up and soldbusinesses including a brewing chain and a frozen foodsbusiness. He sold Darya, a frozen foods business named after hisdaughter, to Russian oligarch Roman Abramovich in 2001, and soldhis brewer Tinkoff to InBev in 2005 for 167 million euros.

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