TCS Group Holding Plc, the owner of Tinkoff Credit Systems Bank, announced plans for a $750 million initial public offering in London, set to become this year’s first Russian company to sell shares in the city.
TCS is poised to sell between $150 million and $200 million in the form of global depositary receipts, according to a statement today from the Russian consumer lender. Chairman Oleg Tinkov, who owns of 61 percent of the bank, will sell shares, along with Goldman Sachs Group Inc. (GS:US), Baring Vostok Capital Partners, Horizon Capital and Vostok Nafta, TCS Chief Executive Officer Oliver Hughes said today on a conference call. None of the selling shareholders is exiting, he said.
Tinkov’s offering comes after Russian coal miner Sibanthracite Plc (SIB) and railroad-freight carrier NTS Holding Plc postponed London IPO plans this year. OAO Alrosa, the world’s biggest diamond producer by output, plans to sell a 16 percent stake in Moscow. TCS is seeking to benefit from Russia’s growing consumer lending market, even as credit risk rises.
“We’re very much an online company that enables investors to tap into the Russian consumer,” Hughes said today. “We have a very deep reach into Russia’s regions, there’s enormous potential for growth in Russia’s regions and we, through our business model, are able to tap into that growth prospect. There’s still very strong consumer demand so retail is strong.”
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 encountered while living in San Francisco.
Hughes said 85 percent of TCS customers live outside Moscow and St. Petersburg, Russia’s two biggest cities. The bank had issued more than 3.5 million credit cards by the end of June, according to the statement.
TCS Bank’s net income in the first half of the year rose to $79 million, compared with $52 million in the same period a year earlier, it said. Total assets equaled $2.42 billion as of June 30, with consumer deposits at $977 million and loans to customers at $1.95 billion, according to the statement.
Russia’s consumer finance banks face an increase in bad loans in the unsecured retail lending market, Moody’s Investors Service Inc. said on Sept. 12, noting TCS among those with “heightened risks.” Russian bank lending to households rose 34 percent earlier as of Aug. 1 from a year earlier, while unsecured loans rose 39 percent, according to central bank data. That is higher than the regulator deems “comfortable.”
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., Tinkov said in an interview last year.
TCS sees a “wide investor base” for the IPO, Hughes said, declining to reveal if the lender has any anchor investors.
Goldman Sachs, Morgan Stanley and Sberbank CIB will be managing the sale, while JPMorgan Chase & Co. (JPM:US) and Renaissance Capital will also be joint bookrunners, according to the statement.
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