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 10.3% in 7M22, 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 September 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 300 mln+ 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.
  • Enhancing ESG practices 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