MOSCOW: Russian entrepreneur Oleg Tinkov’s consumer credit firm TCS priced its London IPO at the top of a target range and its shares gained five percent on debut as investors bet on its ability to capitalise on households’ growing appetite for debt.
TCS Holding Group, owner of Tinkoff Credit Systems, has challenged state-controlled banks and grabbed market share in the high-margin business of consumer credit. The company focuses on Russia’s regions where it delivers credit cards by courier. “The fact that (the bank) has no branches gives people some excitement, but that doesn’t mean that costs are (incredibly low),” said Jason Hurwitz, analyst at Alfa Bank, who said TCS still has to spend money advertising and delivering cards by courier across the world’s largest country.
Hurwitz said the investment case largely comes down to TCS’ ability to charge high effective interest rates, factors hard to predict due to changes in regulation and competition in Russia.
Unsecured lending to Russian households grew by as much as 50 percent last year as the country’s emerging middle class demanded more consumer goods and banks rush into the profitable market.
In the six months to the end of June, TCS issued 710,000 credit cards, bringing its total number in issue to 3.5 million compared with 2.8 million at the end of last year. The interest rate for purchases ranges from 24.9 to 45.9 percent.
TCS is raising over $1bn in the offering which values it at $3.2bn.
The company was founded in 2006 by Tinkov, who came up with the idea of a direct mail credit card business while taking a sabbatical in San Francisco and receiving adverts through the post from Capital One.
Prior to supplying credit cards, Tinkov built up and sold businesses including a brewing chain and a frozen foods business. He sold Darya, a frozen foods business named after his daughter, to Russian oligarch Roman Abramovich in 2001, and sold his brewer Tinkoff to InBev in 2005 for ¤167m.
Reuters
