Russian car dealer Rolf set to enter India

MOSCOW (Reuters) - Russia's Rolf Group hopes to start car distribution and retail operations in India this year, banking on the surge in demand from India's middle class, Rolf Chief Executive Officer Nick Hawkins said on Friday.

Rolf, Russia's leading distribution and retail company for foreign cars, opened a branch in India last year and is finalizing the list of manufacturers with which it will work there.

"I think by the end of this year we will probably have more tangible operations there... We would probably enter at the same time with retail and distribution," Hawkins told Reuters.

"It's a billion odd people. It's a fantastic market place...but it is a longer-term investment," he said, pointing to the upsurge in demand among the middle class as one of the Indian market's key strengths.

"We can do an awful lot with brands that aren't already there," Hawkins added.

Outside Russia, Rolf currently distributes only Mitsubishi Motors Corp (7211.T) cars in Kazakhstan and Kyrgyzstan.

FUNDING EXPANSION

Hawkins said the company is also looking at making a retail acquisition in Kazakhstan and entering another Central Asian market -- Tajikistan -- before the end of the year.

In Russia, Rolf sells 13 foreign car brands through its own retail business, and has recently started distributing cars for Chinese automaker Geely Automobile Holdings (0175.HK).

"We would hope to extend that into Central Asia going forward but that is still under negotiation," he said.

Rolf is also considering two buys and setting up logistics facilities in Russia's regions.

"We are also looking at doing a much more exciting and bigger transaction in Moscow," he said, declining to give details.

The money for this shopping spree would come from Rolf's own coffers, Hawkins said. "We have the resources to do that."

Turnover for the company is forecast to be nearly $6 billion in 2008, up 50 percent from last year, and in 2010, Hawkins said, the company plans to be worth $10 billion.

"I can see that there is going to be further consolidation going forward and we would like to be at the front of that rather than trailing behind."

The expanded retail network will help Rolf increase its distribution of Mitsubishis to 160,000 in 2008 from last year's 140,000.

DIVERSIFYING

Growth in Russia's automotive market, which has seen yearly demand growth of around 30-40 percent for most of this decade, is widely expected to plateau in the coming years.

Rolf expects growth to begin stabilizing in 2012, while in the shorter term, a slowdown in profitability might come from growing supplies.

"I think you will see a lot more products coming to the marketplace if you compare it to the level twelve months ago. My perception is that you will see some level of price competition around selling in the fourth quarter," Hawkins said.

Some car dealers and manufacturers have also complained that Russia's brief war with Georgia and the resulting turmoil on Russia's financial markets, which have sunk 40 percent since May highs, have cut into consumer confidence.

To protect itself from these risks, which Hawkins said have been overblown, Rolf has diversified into the business of logistics and banking.

Hawkins confirmed reports that Rolf was in discussions about merging its automotive logistics business with that of Helsinki-based Avelon Group.

"It is quite clear that we would gain scalability from this, it would help in terms of management of that business. From my prospective yes, it's an interesting proposition," he said.

By January 1, 2009, Rolf's newly acquired bank, Moscow Capital Bank, will be operational, giving the company access to the auto-lending market, for which Rolf's could generate a loan portfolio of $450-500 million every year, Hawkins said.

"Also over time we want to expand into other credit products like insurance, mortgages, etc."

(Editing by Jon Loades-Carter)