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Goldman Raises $226 Million by Selling Shares in TCS IPO

Oct. 23 (Bloomberg) -- Goldman Sachs Group Inc. raised $226 million selling stock in TCS Group Holding Plc’s initial public offering yesterday, cashing out almost two-thirds of its stake in the Russian consumer lender.

The investment bank, through its ELQ Investors II unit, sold 12.9 million of its 21 million shares, reducing its stake from 12 percent to 4.5 percent. A spokesman for the New York-based company declined to comment.

Goldman Sachs is vying to compete with Russia’s leading foreign investment banks such as Deutsche Bank AG and Citigroup Inc. by using the more than $1 billion it invested in private equity since 2007 as leverage to win deals and woo the Kremlin for roles in asset sales. Goldman Sachs bought stakes in Russian companies on condition that it gets equity and debt mandates later, a person familiar with the deals said in 2011.

“There’s nothing sinister here,” Jason Hurwitz, senior banking analyst at Alfa Bank, said today in a phone interview. “It is not the first time Goldman Sachs has shown greater foresight than other investment banks.”

TCS priced the IPO at $17.50 a global depositary receipt, valuing the firm at $3.2 billion. The GDRs fell 0.8 percent to $18.15 today in London.

Goldman Sachs and other investment banks managing the sale may benefit from selling as much as $163 million in additional shares, TCS said in a statement.

Branchless Bank

TCS, founded as Tinkoff Credit Systems in 2007 by serial entrepreneur Oleg Tinkov, has issued more than 2 million cards in Russia and now ranks fifth in lending, according to the company. The branchless bank is modeled on McLean, Virginia-based Capital One Financial Corp., which pioneered the distribution of credit cards through direct mail, which Tinkov said he learned about firsthand while living in San Francisco.

Tinkov has created and sold businesses including a retail electronics chain, frozen-food producer brewery and restaurants.

Goldman Sachs acquired its initial 10 percent holding in Tinkoff in October 2007, according to a prospectus. In 2008, Swedish fund Vostok Nafta Investment Ltd. became a shareholder, and Baring Vostok, Russia’s most successful private equity firm, and Ukraine’s Horizon Capital bought stakes last year.

The IPO, the largest by a Russian company in 11 months, values the lender at 4 to 5 times book value, according to Natalia Berezina, banking analyst at UralSib Financial Corp. OAO Sberbank, Russia’s largest lender, trades at about 1.3 times book value, according to data compiled by Bloomberg.

‘Heightened Risks’

Russia’s consumer-finance banks face an increase in bad loans in the unsecured retail-lending market and TCS is among those with “heightened risks,” Moody’s Investors Service said in a Sept. 12 report. Russian bank lending to households rose 34 percent as of Aug. 1 from a year earlier, while unsecured loans surged 39 percent, according to central bank data. That’s higher than the regulator deems “comfortable.”

The bank is “an unique story, but in my opinion in current conditions of overheated consumer lending, Central Bank regulations, rising asset-quality problems and general cost of equity for Russia and Russian banks, it’s still too high a price for Tinkoff,” Berezina, who values TCS at $1.6 billion, said in e-mailed comments.

To contact the reporter on this story: Jason Corcoran in Moscow at

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