Our Strategy

Georgia Capital — Strategy

Georgia Capital strategy is based on three key pillars

Georgia

Diversified Resilient Economy

  • Diversified non-commodity reliant economy with consistently high GDP growth across the last decade

Top-ranked in economy environment indices

  • Seventh in "Ease of Doing Business" (2020).
  • 2nd in regulatory quality, 3rd in government effectiveness and 6th in control of corruption indices among upper-middle income countries (World Bank, 2021).
  • Low corruption and bribery risk (Transparency International, 2021 and Trace International, 2021).

Investment-led GDP growth

  • Development of large public infrastructure programmes backed by multilateral international funding driving potential GDP growth.

  • Infrastructure expenditures have reached record-high levels in 2019-2021 and are planned at another high of 8.8% of GDP in 2022, with public investment set to continue supporting growth in the medium run.

  • Economic resilience has been underscored by a double-digit real GDP rebound of 10.6% in 2021, as the economy also overtook its 2019 level by 3.2%. Real GDP growth reached 10.4% in 1Q22, maintaining pace.

Historically low inflation with 3% target set from 2018 by National Bank of Georgia

  • Inflation, like elsewhere around the world, was elevated at an annual 9.6% in 2021 due to the COVID-19-induced supply side pressures and swiftly recovering domestic demand, with the National Bank of Georgia tightening the monetary stance (monetary policy rate highest since 2008 at 11% as of May 2022) and reaffirming commitment to achieving the 3% inflation target. With the Russia-Ukraine war exacerbating inflationary pressures, inflation is expected to slowly decelerate but remain above the target during 2022.

3-fundamental enablers

Access to capital

  • Only Group of its size and scale focused on investing in and developing businesses in Georgia.
  • Uniquely positioned given the access to capital in a small frontier economy.

Access to management

  • Highly experienced senior management team, which grew BGEO Group (predecessor company) by c.33 times in asset size between 2005 and 2017.
  • Reputation among talented managers as the “best group to work for”.
  • Attracted talents have demonstrated a solid track record of successful delivery.
  • Proven track record in turning around companies and growing them efficiently.
  • Proven track record in monetising investments through cash exits.
  • A platform for entrepreneurs to build institutions (entrepreneurship culture):
    • If we do not have the right people, then we do not invest, no matter the attractiveness of the opportunity.

Strong corporate governance

  • Strong Board comprised with mainly of independent directors with extensive international experience.
  • Outstanding track record in institutionalising businesses, creating independently run/managed institutions.
  • Approximately 40 employees at the holding company level.
  • Highly experienced management team in each portfolio company with a strong measure of independence.
  • Aligned shareholders’ and management’s interests by share compensation.
  • High level of transparent reporting.
  • Delivered on last year’s commitment to disclose against the Task force on Climate-related Financial Disclosures (TCFD framework) and enhanced ESG reporting by publishing our first annual standalone Sustainability Report.

Capital allocation & Managing portfolio companies

Capital allocation

  • Highly disciplined approach to unlock value through buying, developing and monetising businesses.
  • GCAP develops and grows portfolio companies to equity value of GEL 0.5bln+ and realizes proceeds through exit, as investments mature.
  • Disciplined when investing by buying at reasonable prices.
  • 360-degree analysis to be performed when evaluating capital returns, new investment opportunities or divestments.
  • Exit options are set prior to making an investment decision.
  • Georgia Capital does not have capital commitments or a primary mandate to deploy funds or divest assets within a specific time frame. As such, it focuses on shareholder returns and on opportunities which meet its investment return and growth criteria.

Managing portfolio companies

  • Attracting and developing talent is a top priority.
  • Aligned management style with institutionalised/ noninstitutionalised portfolio companies.
  • Share ownership plans (proxy shares) for portfolio companies’ management.

New strategic priorities announced on 2022 Investor Day

Georgia Capital has introduced the following strategic priorities on Investor Day on 9-May-22:
  • Deleveraging GCAP HoldCo by bringing down the NCC ratio below 15%.
  • Reduce and maintain portfolio companies’ leverage to respective targeted levels.
  • Execute the separation of the Chairman and CEO role and ensure a smooth transition.
  • Set measurable ESG targets at both GCAP HoldCo and portfolio company levels continued progress on the divestment of “other” portfolio companies.

More details on our strategy priorities are available at the following link: https://georgiacapital.ge/ir/presentations