Tinkoff Credit Systems, a Russian consumer lender considering an initial public offering, said it could put itself up for sale to a company such as Google Inc. (GOOG:US)
An IPO could raise as much as $500 million and may happen in the next 24 to 36 months, Chairman Oleg Tinkov said in an interview yesterday. An alternative exit for Tinkoff Credit, which started in 2007 with the help of investments from Goldman Sachs Group Inc. (GS:US), could be a sale to a company trying to expand in the Russian lending market, he said.
“One possibility is Google,” Tinkov said, without saying whether Tinkoff Credit is in talks with the Mountain View, California-based search company. “They cannot create local credit expertise. They’d have to buy.”
The branchless bank of Tinkoff Credit is modeled on Capital One Financial Corp. (COF:US) in the U.S., a pioneer of card distribution via direct mail, which Tinkov said he learned about firsthand while living in San Francisco. Since it was founded, Moscow- based Tinkoff Credit has issued more than 2.3 million cards in Russia as of August and it ranks fifth in lending, according to the company.
A Google representative declined to comment. The search company said this week it’s starting a credit business to help clients finance the purchase of online advertising.
Tinkov said that the London stock market is the front- runner for an IPO because there isn’t enough liquidity in Moscow and reporting rules are too stringent in the U.S. However, the company has no plans to expand its services into the U.K., he said.
Tinkoff Credit said yesterday it would aim to raise $350 million to $500 million in an IPO. The Russian lender previously said it could raise about $500 million and use the proceeds to add small business loans and insurance products to its suite of financial products. In July, Tinkov said his best case scenario would be to have an IPO in the fourth quarter of 2013 or early 2014.
“We tend to back our winners,” said Julian Salisbury, managing director of the European special situations group for Goldman Sachs. “We’ve made subsequent investments, providing loans and equity, and are in the main very happy shareholders. We’ll exit together.”
Google began offering credit to businesses through its AdWords offering in the U.K. this week and will extend the program to the U.S. later this month. The AdWords Business Credit accounts will help corporate customers pay for their online advertising.
Google, which controls 26.6 percent of the search market in Russia, lags local company Yandex with 60.6 percent. Google is part of a wave of international companies attempting to break into the Russian market and its more than 70 million Internet users.
Tinkoff Credit predicts profit to surge next year, Tinkov said.
“We have to serve the customer better, we have to gain market share and net income will be much higher next year,” he said. “It’s very hypothetical. We are IPO ready today. We have to deliver the numbers first.”
Tinkoff Credit will report net income of $120 million for 2012, president Oliver Hughes said yesterday. By the end of next year, the lender may be valued at 12 to 14 times earnings, Tinkov said.
Tinkov, who has created and sold several businesses, including a frozen-food producer, a retail electronics chain, a brewery and a string of restaurants, has also created a mobile ad platform called Tinkoff Digital, which facilitates sales of online display advertising targeted at Russian customers.
The Siberia-born entrepreneur said he worked in a mine for a year before moving to St. Petersburg in 1988 where he attended university and started his first businesses.
“I strongly believe that Russia is one of the best places to be in terms of doing business,” Tinkov said. “One hundred forty million people, no competition, very fast growing market. It’s very profitable, there is a lot of cash, and consumers spend money.”
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