By Elif Kaban
MOSCOW, Jan 31 (Reuters) - President Vladimir Putin backed curbs on Russia's booming gambling industry on Tuesday, just as Ritzio Entertainment Group prepares the country's first initial public offering of a casino firm's shares.

Putin told a Kremlin news conference that the government and State Duma lower chamber of parliament were drafting proposals to regulate gambling in Russia, where the business is growing by an estimated 30-40 percent a year.

Putin called gambling an addiction "no less serious than dependency on alcohol and drugs."

"It is a problem," he said. "We should think of ways to protect our people from what's happening in the gambling business."

Ritzio, controlled by a Cyprus-based company, runs the Vulkan chain of gaming clubs, whose adverts promise "a volcano of luck."

No announcement has been made on Ritzio's flotation so far but banking sources say the company has hired Credit Suisse and Renaissance Capital as advisers for an IPO in London this year.

Both have declined to comment.

Russia, whose people have loved gambling and all-or-nothing bets since the days of Catherine the Great, has no federal laws regulating the gaming industry.

The throbbing neon of casinos and one-armed bandit parlours lights up street corners in Moscow's city centre, many next to schools and homes -- a change from communist times when gambling was outlawed. State Duma proposals call for a complete ban on gambling in some cities including Moscow, doubling taxes per slot machine and casino table, banning gambling in residential areas and raising the minimum size of gaming outlets to weed out minnows.

The draft is due to have its second Duma reading sometime in February, after which any amendments will go to the Federation Council upper chamber. The proposals will then have to be signed into law by Putin, which analysts expect later in 2006.

OUTLOOK LESS CERTAIN

Bankers had said Ritzio might be worth $2-$4 billion but now the outlook for the deal, which would be the first IPO in Russia's gaming industry, may be less certain.

"The timing is quite unfortunate," said Natasha Zagvozdina, an analyst who follows the sector at Renaissance. "The regulations could affect the valuation and the size of the company and its business."

As of May 2005, Ritzio ran 681 gaming halls equipped with 30,000 slot machines -- up from 3,100 in 2002. One-armed bandits account for most of its revenues.

Moscow's City Hall has lobbied against a gambling crackdown inside the city limits. The capital has about 67,000 slot machines and gaming taxes contributed 8 percent of the city's budget revenue in 2004.

Cyprus-based Wolf Investments Ltd controls 60 percent of Ritzio and Lambert Investment Fund owns 15 percent. Management and private investors share the rest, according to MDM Bank.

One London banker familiar with the gambling industry and Russia said investors should beware.

"The absence of regulation at the moments keeps investors exposed to the potential of over-regulation," he said.

"Putin's new interest can be seen in two ways -- by virtue of the government having a look at it, this means regulation is kicking in, which is good. However it also means that things can change from one extreme to another."


Date Posted: 31-Jan-2006