Good Investing Talks - Is Georgia Capital a chance to cheaply invest in quality assets?

Episode Date: October 11, 2022

I had the pleasure to interview the CEO of Georgia Capita Irakli Gilauri. Georgia Capital is a holding that owns a lot of quality assets.

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I really like their tool and it's a high recommendation by me. And now, enjoy the video. The audience of good investing talks, it's great to have you back for another podcast episode. This time we are covering more exotic stocks. And today we are having Irakli of Georgia Capital here. He's coming from Tiflis, I think.

You're currently in TFIS or? Yes, yes, I am. It's great to have you here. a warm welcome. Thanks, Thelma, for a invitation. My pleasure. It's great to have you here. Maybe let me get some more details on Georgia Capital out and why I've invited you.

We already have talked a bit in the community, good investing plus. People can apply wider link below if they want to learn more. I think Georgia Capital is a very interesting opportunity to participate in a quite liberal, like in economic sense country and it's also quite well managed and yeah quite cheap at the moment so people might be interesting to learn more about it we also had some more videos

on a channel on Georgia Capital which will be linked here so people can find them so look above here so people can find these videos already but in this podcast I also invest some time to better understand how Georgia capital came about and like what your background was.

Iraq, you let us jump a bit back to the 1990s, the early 1990s. He both were a bit younger then and the world was a bit different then. So Georgia just came out of the post, yeah, the post-Soviet time. And as I read your biography, I found out that. you were studying in the late 1990s in Ireland and in London and learned investing there and banking there. But like how did you come interested in banking and investing and how was Georgia in the late 1990 or the early 1990s?

Yeah, so very interesting times. I was very young back in 90s when Soviet Union collapsed. And it was it was interesting. interesting to observe how the country lost nearly 75% of the GDP. And you can imagine that there was no water, no electricity, no roads, roads were collapsing, no heating. Even it was difficult to communicate over the telephone. And I lived as a teenager. I lived in that times.

And in 93, I started my youth. university studies at the georgian technical university doing business back then everybody wanted to do business because we didn't know what the hell the business was because everything was owned by the government you know nobody knew what the banking was because it was a state-owned bank and state-owned bank was giving the loans to the state-owned companies and retail in the retail client base was not existing other than depositing money which was like I don't know small amount of money deposit, you couldn't even borrow the money from the bank. So this whole world of doing the private business was really exciting for me and for

everybody in Georgia because we didn't know. I didn't even know what the marketing was, the world marketing or, you know, action, what kind of action you need to take to sell the product. So basically, because it was like all supply driven. So basically when I started my study in 93 in Georgia Technicons, University, we had the exchange program to study language during the summer. So I applied for that program and I went there for three months and I said that, okay, I'm not going back now. You know, I need to stay here and study business because, you know, back in Georgia, I mean, with all due respect,

there was no knowledge of how the business is done or how economy is working because we were in a common economy, basically. It was not market economy. So it was really a big eye-opener for me. And so I basically applied for the university. I went to the dean and I had very little English. And I persuade the dean that I really, really wanted to study here. And Dean said that, okay, we usually don't accept the like this, the students, but you want so much to study that we will accept you.

So that's how I ended up basically just wanted to. really wanting to do it. So, so, and it was, for me, it was game changer, basically, because in a way, I was really ahead of my peers in terms of understanding how macroeconomy works, how business works, how accounting works because of those different type of accounting as well. But, but anyway, it was, you know, how the devaluation works of the, et cetera. So it was a big, big difference. And after two years, studying.

In the university, I had the choice to choose the banking or management, etc. And I chose the banking because I thought it was something which with Georgia really needed to move forward. And I understood that the bank is a big player in the economy with the good bank. Economy can really grow and flourish. Without that, it's like very difficult. So that was my choice back then in 1996, in 98. I graduate from the university. I had a four-year, really, really exciting studies there.

I mean, I'm really grateful to my luck that I ended up there. But also your passion that you pushed, it's not normal that people are just like so stubborn. I mean, I guess we Georgia's are a little stubborn, you know, so sometimes it helps. Not always, though. It does. Did you then decide to go back to Georgia right away? So basically, no, I decided to go back, I wanted to go back, and I went and I studied, I'm sorry, I started the work with National Bank of Georgia, and soon there was an exciting opportunity with the European Bank for reconstruction and development, and I got a job there, and I worked at DBRD in more than four years, and then basically I decided that maybe I need to enhance my studies. I don't know why I decided. but I decided EBRD was a great platform for me to learn the banking.

And then we basically started the, then basically I got the Chevening Scholarship, UK Government Scholarship and I studied the banking and international finance with City University Cass Business School. Back then it was called Cass Business School, basically. So it was another great opportunity for me. And I want to thank the UK taxpayers. for that opportunity. And basically then I came back again and I came back at the Bank of Georgia as a CFO.

As you had like no real private banking or even low market economy and no real private banking. So you had to build this this banking system from scratch. How much were you involved in this from the beginning or did you like, was there already something built when you entered Bank of Georgia? So when I entered the Bank of Georgia, when I started with Bank of Georgia in 2004, there were 20,000 debit cards outstanding. Credit card was not existent, basically. And debit card cost you a fortune. You had to pay $300 to get the debit card.

And the bank had eight ATMs. So our strategy was eight, yeah, eight, literally eight, yeah. Yeah, two hand full of ATMs. So that was something, yeah. So basically the strategy was very clear, basically, that we wanted to build the retail bank and actually not built. There was, I mean, try to bring people into the banking because people, it was all cash economy.

People were using the cash and they didn't know how to even borrow money. banks were not willing to lend to retail client base. So it's all those all focuses on those corporate banks. And when I started with Bank of Georgia, we had a market share of 15%. Market cap of Bank of Georgia was less than $20 million, basically. The balance sheet was 200 million dollar in total assets. So the penetration, I don't remember the penetration. but it was a single digit for sure, could we below five?

So total assets to GDP was probably 3% or 4%. And that was, and we started consolidating and we started to open up the branches. We were buying the ATM, et cetera, and we were investing in retail banking heavily. And we went in 2006 and in London and we topped the market. And that was something because we had. have we raised 150 million dollars and that was a lot of money back then i mean it was a huge IPO it was big deal so and because of the we raised the capital and then we we shoot the euro bond that was another kind of big achievement and so so we we grew very rapidly into retail banking

and penetration started to grow and the the assets we would you know double triple in a year even more Sometimes I think there were times that we quadrupled in asset size. So it was a penetration game. It was a very low penetration, consolidation was happening. And I mean, these kind of things will never happen now in Georgia in banking for sure. But there are some sectors you can do. There are penetrations are low and you have a very fragmented market. And that's where I think that we are our specialities.

That's where we can fill the market and grow. And as you know, this $20 million market cap, we were in a $2 billion market cap in 2018 when we demerged the bank into the investment arm and into banking, basically. So it was a great ride. And I think that fragmented sectors, especially in service industry, is a very beautiful thing. Are you already in the topic because you made a bridge to the foundation of Georgia capital? I think you started first investing with Bank of Georgia, where you were CEO in 2011 or became CEO in 2011. You started investing into other business, I think in 2014 round about that.

I think the hospitals. So basically, I became the Bank of Georgia CEO actually in 2006 or 2007, basically. And then in 2012, we did the premium listing when we upgraded our listing from GDRs into premium listing where we got into the Futsi 250 index. And so we grew our market share from more than double to 35%. So we had a 35% market share. We were making 25% return on equity. We had a very strong capital base, et cetera. And in early 2007, we ventured in Ukraine and we invested in Ukraine, and we lost a lot of money there.

So we came back, you know, and sent to Georgia wounded, you know, in scars and bleeding, basically. And we said that, you know, we need to do something else, you know, because we have a really very strong position in Georgia. We are growing. We are compounding like there is no tomorrow. And what else shall we do? And so we said, okay, because we don't know how to operate outside Georgia, let's focus in Georgia in different industries. And we started to pick some of the industries where we saw that, you know, we could benefit.

And one was the health care, another was real estate, because we had some number of real estate, collaterals, land plots repossessed during the 2008 crisis. So we said, okay, we have this landplots. It's not very easy to liquidate them or to sell them. So let's build the apartment blocks, wrap up into the mortgages, and sell through the branches, this wrapped up mortgages, basically. And it was ticket size for the, we were doing the long-term mortgages. Back then, there was no 10-year mortgages.

So we started doing the 15, 20-year mortgages, and it was like a revolutionary. And we were basically, we were selling this. apartment blocks, but to be honest, our retail business was benefiting even more because we were getting really high-end client base. And Bank of Georgia was more known to be mass retail, basically, and we started to get more high-end with this mortgage products. And then with insurance, health insurance, we started, and then the government had some program that they would pay for the health insurance for some of the people, but the insurance

company had to build the hospitals government actually what they did that infrastructure or hospital infrastructure in georgia was fully amortized i mean i don't want to even say you know what kind of shape and form these hospitals were i mean it's it was really bad to take the patient there basically if you were not ill you would get ill in the hospital for sure you know so so government came to the insurance companies and said that, look, you build the hospitals, new ones, because there's no point of renewing the existing ones. We will exit from the healthcare system fully. And basically, we will pay for the insurance premium for the healthcare for, I think

back then was one and a half million people. So we said that some of the insurance companies saw that it was like an insurance enhancement for healthcare, but we went and looked at the healthcare system as a whole, and we saw we were shocked that it was bigger the banking, it was totally, you know, the government exits is like a totally fragmented. So we said, okay, we need to consolidate it. We need to maybe an investor in healthcare. It's not like an insurance, just invest, a bills, hospitals. We should separately manage the hospital separately manage the insurance. And basically, build and grow

and basically we went and grew I think it was one stage we had like 30% market share in hospital beds and next one was like 2% or 3% so we and then we entered into we bought

the water utility we entered renewable energy we bought then two pharmacy chains and we consolidated them and that was probably one of the best acquisitions we have done. We consolidated five insurance, different five insurance companies, merge them. And so that was kind of a, and we grew that business pretty rapidly. And it became a very big portion of our

business, not very big part, but it was like one third was this investment portfolio and two third was the bank. So it became a pretty big. So it became a pretty big, when you were CEO of Bank of Georgia. Yes, we are, we are, I'm a CEO of the Bank of Georgia, then we restructured we put the in the bank the different CEO became the CEO of the group and we had a kind of a different uh this this portfolio companies we had a separate CEO there so it was it became like a bank conglomerate maybe you know in Germany when Deutsche Bank and the this auto producer etc that it was a big conglomerate bank conglomerate something like that probably that's what that's where we we were so that goes kind of a big gross anyway we listed

the healthcare business separately actually so we had we had a two listed companies bank of georgia and the georgia healthcare group maybe let's go back a bit before like 2018 you started to spin off georgia capital with a lot of the assets but before that what kind of framework did you use to to find new businesses was it more like that you're going to got approached by people or was there already a framework that you looked for certain business criteria and declined others? So basically we, I think number one thing for us always was the management. Do we have a management depth who will manage this or that business?

And this is, this was first was always the management. Then we obviously looked at the sector. and how attractive it was margins investment etc but we really like this consolidation stories of the fragmented especially in service industry basically so and and that's that's kind of where was a criteria and also i think that you know the the pricing was us was very very important we we call it we want to buy cheaply and everybody wants to buy cheaply obviously you know but you know for us was the we can you can make a lot of mistakes when you buy things cheaply and because we were self-learners

we cannot allow to us to pay full price so we were we were opportunistic we're looking at some opportunities and in georgia access to capital is is and was very limited so we there is no private equity funds focusing on georgia local capital market is not developed so access to capital is very very much limited So we were probably the only game in town if we wanted to exit your business, probably you should talk to us, basically. So that was kind of an approach. What is cheap for you then? Like what multiples do you think of then?

Yeah. So basically, usually what we would do, we would say that we would take the public company multiples and we would divide by two. So, for instance, health care businesses we are trading at 12, 15, 20, 25 times. So we wouldn't take it 25 times, obviously. We say, let's say 10, 12, you know, 40. So we would not allow ourselves to buy

hospital more than six times. So we would buy it five times, four times. That was kind of a target, was that we bought most of the hospital below five, very last one we bought, I think, closer to six times. So that was kind of how we were defining the cheap, you know, half price. We want half price. Before we jump into Georgia Capitals Foundation, maybe let's think a bit about Georgia as a market.

Georgia has 3.7 million inhabitants, I think, as Wikipedia said. And it might be also very densely, the people live in very densely populated areas like, yeah, around Tiflis and some major metropolis, so to say. So how much of Georgia's economy did you already know before you founded Georgia capital in 2018? Because we were the bank and we were doing the corporate banking, we knew a lot about Georgian economy and the sector, etc. We were kind of pretty knowledgeable. As I say, we knew every cat and dog in this town. And then every player in business, basically, we understood very well, et cetera.

So that's obviously a helpful knowledge in general that you know the sectors, how they operate. But actually, it's a very different proposition to be a lender or to be an equity holder. Actually, we landed later on, but before we were very confident, we knew a lot about it. But it's actually not like the case. You know, you need to, you learn more and when you become an equity investor. But anyway, so that was kind of a, yeah, we actually were comfortable with Georgia because we know this country very well. Georgia has compared to other markets in the region maybe and also like other developing countries, very pro-business setup.

How good or easy is it to do business in Georgia in your eyes? So basically what we have here that government understands very well in order to create the wells, we need to bring the investments in because we don't have oil or gas and, you know, or we don't have internal resources. We don't have internal savings, internal investors. internally are very limited so we need to bring the we need to we have to be a good friendly to the investors and this is the only way we're going to grow our GDP so and that's government understands very very well and and that is the primary driver for the georgia to be so business friendly and

investor friendly and i think we are very lucky not to have an oil and gas uh you know it would be a a different country and probably you know not very you know not very well run and managed to be honest i am i don't want to you know exaggerate but it's my speculation basically but um but government knows that we need to have a good governance uh and they have excellent governance uh they have an excellent business environment uh so we are we are very happy to to be investors in georgia so that's a kind of probably the biggest comfort as well you know we are we as a georgians participate in the building of this country so it's a privilege you know it's a kind of lifetime opportunity when you are building the new sectors you are building new management you're building

new companies and and you are doing all of this in your country and these companies are helping this georgia to go forward and you participate in this you have some small participation in the progress which this country is having so they say it's great pleasure to invest in here do you see any risk that the pro-business set up changes with political shifts in the near future i don't believe because basically the the fall of the communists 90s and i'm going to say probably not very popular thing now but I think we should let all the nations to go fully bankrupt because they get their act together. And sometimes we want to help them.

We are good people. You know, we want to help them. There's an IMF. There's a World Bank. And there's great organizations. But basically, you are not letting the nation to learn its lesson. And that's what happened to Georgia in early 90s when we lost 75% of GDP. Back then, nobody knew what Georgia was and who the Georgia was, basically.

So we were not even a part of the World Bank or IMAF probably in the beginning. We were, soon probably we were. But so what happened that Georgia went bust and people realized that there's two things why we live so badly. One is the corruption. And second one, there was a big corruption during Soviet Union. And that was the main thing. corruption, and second one is a socialist and communism. So the side effect now we have that, you know, left-wing parties have a very, very low

popularity. Left-wing parties get less than 5% together. So basically, you need to be a pro-business, pro-market in order to win the elections in Georgia. So I do not think that anytime soon we are fearing this, that is another reason why we eradicate the corruption, et cetera, and we tackle this problem, was exactly because of this lesson learned in early 90s. And that was kind of a big health to the country that we were sorting out the governance and we are actually pro-market. governments are pro-market basically and and some people want to you know equality and and and socialists and i would you know would love to invite them to georgia in 90s or late 80s to

experience it coming back to the point of corruption is there still significant or is there still corruption in georgia or is it like tiny no basically we are doing the business and we are everywhere we don't we don't come across that so basically there could be something somewhere something but it's not it's not something which comes from the top it's vice versa basically so so that's kind of another big pleasure to be in this country that's where you are when you do the business you do it for business and that's that's kind of a also another kind of big plus for this for georgia so let's jump back to the business level as i already promised in 2018 you decided to spin off parts of the bank of georgia conglomerate into georgia capital why did you

decide to do that i think there was uh there was cut now number of different reasons but basically we were systemic bank and we were investing also at the same time. I think it's a little bit unfair for for stakeholders of Bank of Georgia to have a to to possess the such risk as having the investment is a risky business basically. It's a very risky business and you have a bank and the investment together and deposit the teacher. So it's one it's one leg. Another one is that it was becoming too complicated basically and too big. And we were also very big for the country. I mean, imagine, so we were in 2018, our market cap to GDP was 12, 13% and all our business were in Georgia. As a comparison, Samsung was the same market

cap to GDP ratio, but they were all over the world. Now, you can imagine how big we were for this country, basically. So we, we, we, it's just we had to split this two and have a pure banking, which would be, you know, the pure bank play and investment separately. And actually, when we, when we split this tool, investment is, I realize that investment is even more difficult proposition because when you are part of the big bank, you don't, you can have a margin of error let's put that way because a big conglomer and you became we became smaller basically without the bank and and we realized that it's even you know our discipline should grow

we should double or tripled why did you keep the shares of georgia bank of georgia in georgia capital so basically because the market cap would have been too small and we thought that our investors would suffer with the liquidity of the stock etc so that's why we kind of increase the size of the investment company so that was kind of the the main idea behind it and and that's probably is a helpful I don't know but back then that's what we saw that would be would be beneficial for the size wise and liquidity wise to have a bank of Georgia in the portfolio plus is a great investment So you could think of selling these shares one day when the other businesses are big enough? So basically we, I think the Bank of Georgia is grossly undervalued, maybe even more

undervalued than Georgia capital, to be honest. So now we don't think about that at all. So the, but actually, nothing is strategic is in our portfolio. Our strategy is not to have strategic investments in general. But

basically we are not a typical private equity house which can rotate its portfolio. And we are just difficult animal I guess, you know, so that we are not rotating the portfolio

that fast and we won't be able to do it because we are only Georgia focused on one hand side. On the other hand, we are not like a conglomerate which operates from one headquarters, all the businesses. So the Georgia capital is 25 people. We are just capital locators and that's what we do and we let businesses to run themselves because each business needs to have a value separately with management, etc. So in case we decide to exit the business that there is a separate platform which management platform and everything, that's some third party can come in and buy it so so so so basically we are we are not a private equity because

we don't rotate but we are not conglomerate but we somehow we are conglomerate because we are holding maybe longer than uh somebody so it's like i don't know what to call to be honest probably we call it ourselves investment company basically and probably that's what we are i don't know let's find more about your nature in this interview out but coming back to bank of georgia you said it's crossly undervalued what do you think the fair value of bank of georgia is and maybe why i think right now the bank of georgia is trading at three times price earnings and it's making 30% plus ROE you know is it going to make 30 plus percent ROE forever no but can it make a 20% plus for forever?

Probably it can, yeah. I mean, it's been making the show in past, I don't know, 20 years or so or 15 years or so. So basically, I think that, you know, gross you count what cross you want to say that and doubling the price of Bank of Georgia. You know, some analysts do have a target price of 46 pounds when it's now, it's trading at 21, basically. I think one analyst has that but in general I think it's it's yeah it's it's it's a grossly undervalued and then if you look at the like a Bank of Georgia's valuation and then our discount is actually you see you will see how big how grossly the Bank of the

Georgia capital is underwired so I don't you know so that's that's where we are that's fact of life unfortunately but so that's where I see that I think that table of the Bank of Georgia is probably that's where the fair price should be. Coming back to Bank of Georgia in 2000, you had a very warm seat there as CEO. Why did you decide on a personal level to leave this seat or not retire and say, okay, I enjoy life from now on

and I don't want to build a new business line again. And yeah, what drove you to go to Georgia capital? Oh, okay. I think that basically I'm on the person who gets bored easily or maybe not very easily but I need to have I think that it's also exciting stuff to build a new investment company you know I think that we are in the business of building different institutions and when you are building different institutions in different sectors you learn a lot of new things so I enjoy learning of new things in Bank of Georgia actually there's a lot to do

etc. There's a huge digitalization. The new CEO is heading I think he's doing great job in doing that but I think that for me being in different industries, a lot of different industries it's a very exciting

thing to do and so I saw that okay I will let somebody else to run it and join and come and do something else and I enjoy it I don't know why in my place somebody else would say that I want to stay with

Bank of Georgia and okay we spin off and we'll find some new CEO for this investment company from internally or externally or heavy basically I don't know what kind of person would do that. I mean for me it was very obvious that I wanted to Georgia Capital basically to venture

their new things. You already explained it a bit but maybe let's pick this out. What is the key target of Georgia capital so basically the idea is to to compound returns and 25% plus a year and that to grow an navy per share now so far we have not been in a four year of our history we are not there yet in terms of the compound growing our energy but we are not too far away basically i think i think we are at 15% territory now but you know it's not good enough of this land we need to we need to grow

and i think we will grow uh to to make sure that we are making 20% 25% in av grows per year on average in 20 25 we should make but 25 would be you know kind of nice to do uh so that's kind of a the the very simple uh target for us um and um and that's pretty much shit i mean it's not complicated so with this this 25% return target of niv growth it's it's a challenging target and you have to own good businesses for this so what kind of business do you like to own or even build a georgia capital to achieve this target what nature of businesses do you like i think service industries are are some way which was the sector which I think it's exciting and which can grow and generate such

kind of growth and returns the one of my favorite one for instance now is I have I have favorites apparently but anyway my favorite is this is education business K to 12 in the schools we are investing a phenomenal sector I mean phenomenal business it's like it's it's amazing I had ever thought such sector exists. Just to give you just very simple kind of an overview where what education, how education sector works, basically. So you have a revenue locked up for more than 12 years, basically 12 years. You have revenue locked up.

Your capex is limited because you don't build some sophisticated buildings or equipment. You don't need like in hospitals, for instance. compare, right? The hospitals, you need a lot of sophisticated machinery, MRI, etc. Then the teachers are not, are easy to retrain and train, unlike doctors, for instance. And basically, the EBIDA margins are greater than in CAPEX-heavy healthcare. So you saw that the healthcare sector was good, but I have a better one. I think the education one is basically something which is amazing. sector, basically. What has demonstrated education, it's even greater. So the worst crisis, the COVID was the worst crisis for education because kids cannot go to school. They cannot use the infrastructure.

So in that kind of cases, some say in some sectors, you know, they just go bust. What happened in education? We grew in beda in private schools. How are we? How? We saved the costs, you know, we could even make some inflation because inflate some prices because of distance learning, et cetera. But in the worst crisis for education, we actually grew the business group. Now we have more than two times acceptance this year. Now we're just closing the acceptance basically of new students, two times more than the COVID times and pre-COVID times also.

And this has a huge growth in Georgia, because people believe in education in Georgia a lot, and we are offering affordable education. It's one of the, we are actually in all three segments, but we are growing the affordable part pretty aggressively. So, so basically, and that's where we are going to consolidate even further, the education, private education, basically. And that's what kind of, I think this kind of sectors can generate it, no 20 and 25% gross. but even triple digit maybe for some time. You already mentioned that you've changed,

that you learned a lot by changing your position from debt to equity holder. Can you maybe elaborate this a bit and share some of the learnings you had? Sure. So basically just if you look at this two very different animals. So in the bank, you are a debt provider. you are collateralized and you are diversified so you have a much warmer seat when you are investing like the portfolio what georgia capital has we have a very concentrated and you are equity holder and you are on the on the kind of a subordinate to the debt and and

and basically you are your margin of error is very limited so you really need to be extremely extremely disciplined when you're making your capital allocation decisions it's very easy to make a mistake in investing in equity because it's not that easy to run the businesses profitably and grow them profitably and find the good management, etc. So I think that that's kind of a two very different, totally different paradigms and the way of thinking as well.

How important have people become in this equity focused approach. So how much focus do you take on like your team at Georgia Capital and also the management teams in the company? I mean, I mean, basically this is all about the people. I mean, the bank was obviously also the people business and it's we need to have good people. But here is just extremely, extremely important, growing and developing talent and helping them. Because you cannot run so many businesses, it's impossible and don't even try. and even if you do even if you can run then they are not going to be liquid for you because people are buying management we had this recent very good partner coming into our whatever you tell

the business but the focus was that the management with the excellent management team that's what attracts the strategic investors so so we are I mean is we are we need to have a top class management team to bring a top investor because we need we need to bring a strategic investors who would pay international prices so we are what we are doing our business is to buy locally with local multiples consolidate grow bring management and develop as a institution, but develop as an international institution, which would attract the international strategic buyers who would be willing to pay international multiples. And that's kind of a business.

That's why we should be able to generate high returns, because we are not buying at international multiples and selling at international multiples. We are buying at local multiples and building the international team, which would be competitive even if they come to Germany. They should be able to run like the companies run in Germany. And they should be, you know, the checks and balances, governance standards, risk management should be up to this speed so that they can compete even in EU. And that's the proposition. That's what we do. And that's why we think that we have managed to bring a very good investors in Georgia as well, international investors.

How do you find these people and how do you incentivize them right that they stay with you for a longer time? For us, the foundation of Georgia capital is a good governance. We think we are a great believer that good governance gives access to the capital, international capital markets and gives us access to the management. Management is attracted with the good governance. And I think that good management. They want professional well-balanced boards,

which they can learn and grow and develop. And this is kind of attracts each other. Good governance attracts the good management and good management and well-governed companies are attractive. I'm looking for the great talent. And I think that's kind of a, I mean, if you look at the foundation of Georgia Capital is good governance, which gives us access to capital

and access to management. And that's kind of what the Georgia Capital is all about. We need to bring and develop and grow and incentivize. And we incentivize them with shares. So we say, and we have now the proxy shares for each portfolio company. and to say that whatever you manage, you're going to have part of it. And our cash bonuses and cash salaries are not very generous.

You know, it's like, you know, drink, buy a cappuccino and some sandwich. But, you know, they can become wealthy by having a proxy shares or in case of the Georgia Capital and people who work in Georgia Capital, of Georgia Capital shares they take. So, and that participation is a critical. And that's what the great talented people are attracted to. And we are looking all the time. So to work it out a bit, so good governance is not like having fresh fruits every morning for your employees. For you.

Definitely not. We don't have fresh fruits. If they are, if we behave well, we get a cup of copy, Baxi. a day but what is then good governance for you in the company how does it like boil down to examples yeah so so so basically you are there are no personal interests the interests are for the company and to grow and develop the company and interest is for me my interest is to help the CEO to be successful and we can bring help for him the senior people in our on at our board for instance who can help them when they present the projects etc we are they are to help

not to not to push somebody you know the the the politics occupies very little in a good governance probably there are some politics always I don't know it's very loud word maybe to say that we don't have internal politics but you know we are all driven for the value creation and that's your politics

that's our politics so if you want to you know part of it you know you are very welcome and if we start doing some you know internal politics some people's have egos, such, I mean, we all do, we need to manage them.

Right. So that's when you get crushed and you want to bring a good people who want to work for this environment where we are. We all have one goal of creating the value. But like with every good approach, it's normal that you do mistakes, setting it up and you have to learn from them. So since 2018, what kind of mistakes have you done? And what have you learned from it and how did you fix this mistakes?

I think that one big mistake. I mean, it's not big in size, but it's actually in terms of the management time, it took some. We invested in subscale businesses, which were exciting, you know, but it would not really move the needle into the energy of Georgia. a capital and we lost a lot of management time for we haven't invested too much in that businesses so like a ticket size capital wise but we lost the management time which is also a capital right so i think that was the the mistake uh which we realized and that that's why we have the other category in our portfolio where we put this upscale business and we say that you know we're gonna

be exiting it uh slowly and i think that's not slowly but we would exit it's it's for sale basically of this business right so so that that was probably strategically biggest mistake which we made when we started georgia capital now we are focusing on on scalable businesses we say that we want to have a 300 to 500 million larry of equity ticket size achievable before we but invest even if we don't see that this business can achieve equity value of 300 to 500 million Lari within next three to five years we just don't touch it

you know we just so so that was kind of a big one I think that and we realize that it was not a very good idea and we stopped doing it and we don't invest in this upscale business and we are putting up for sale

for we put up for sale the subscale business we exited some of the business already we exited for instance commercial real estate business pretty attractive actually which was small business in our portfolio so we also know I don't think it's a it wasn't that a mistake other than the I guess the strategy wise also another one was that we wanted we we want to focus on the sectors which we which are not capex heavy so the georgia capital having the big discount and we invest in capital

heavy industries it's just you know makes no sense you just then go and buy the georgia capital right so we and and i think that even if our discount goes to zero we should not invest in the capital heavy industries because i think that we will get back to the discount because you need to have a cash available all the time to top the opportunity of the buybacks. That's where it is. And the third one, I guess, I have a lot of mistakes to learn from. I think that another one is probably the leverage at the whole call level is not the best

idea when you are an investment company. So I guess you need to have a limited leverage. Because whatever cash is generated, you are. you know it was I think it's a lot of leverage on hot-co level which we have decreased significantly after the selling our water utility business 80% of all water utility business so that was kind of so we are actually we have realized that mistakes and we have addressed and we are addressing then we will address another another one which we are addressing is is a chairman CEO I think that you know we need to split this role in two because as I said

investment is a risky business we need a greater balance in the governance so i think that uh that would be another improvement which will which will make actually it was a good idea to in a startup phase right but right now after you know for five years of existence and we have i think that we are on the right track i think there is no need for one person uh to occupy these two uh to roles it's a it's a different we are comparing that there are a lot of you know chairman CEOs in the in investment companies who invest in the public stock and we said that you know it's different public stock you have a liquid stock you are your own and you can sell at any time here you are on the private businesses which are not that liquid because you are in georgia to

start with right so but to my surprise they will probably go we'll talk about our exit, but to my surprise, there are actually for good companies, there's a lot of hunger for well-run, well-positioned companies. So it's not that, I thought that Georgia would be not that liquid, but actually for the company class, what we have, I think that there is quite a demand. So anyway, so basically, I think that that's splitting, there's another thing which we are addressing is splitting this role in two, and hopefully next year we will announced the exact how we're doing how does it work that you realize these mistakes is someone coming from the team and saying hey this might be a mistake it doesn't work that well

or is it like you sit there and oh no or you have some mentor who helps you with thinking about things all three people come and say you know that's why you need to have a culture that people speak up. If you don't have this culture that, you know, boss is right and everybody's wrong, it's like you are doomed for failure. So our culture is that you talk about it, what you are not

happy with, etc. Bort is a very good, that's what we call the good governance. When we saw what is a good government example, the example of the good governance identifying the mistakes. Ability to identify the mistakes, right? So that's a good governance.

And board, we have a very high caliber board and the board is very much involved and there they look at us you know sometimes you know we can we can go crazy and there's a board to tell us you are you are too aggressive or you are too such a so that this balance is very very important so I think that and you also yourself yeah and for me it's very difficult to work with people who do not recognize mistakes because we all make it and we need just to learn from it if you don't learn from it you know then it's a it's a bad judgment then it's not a mistake it's a bad judgment uh jumping from mistakes to crisis i think we already mentioned covid a bit but we discussed this in the community

with you because you came on to jet with us and people who are interested in this can jump into the application form below via the link to the community So let's think about a bit about the crisis you currently have, like all the crisis we are both in from the impacts of the Russian attack on Ukraine and all the changes. What does this mean for Georgia and Georgia Capital, like since the beginning of the year? What has changed through the attack of Russia on Ukraine? So Georgia has been attacked before. so we know what it is like that in 2008 and but we were lucky that the whole conflict has been resolved very quickly and and that's kind of a it's we had a

very brief war basically so so we as a nation knew what Russia is capable of. I think that just people, you know, to forget Georgia or this Georgia was too far away from Europe. So, you know, it's not happening with us. It's happening somewhere else. And I think this Ukraine was very close to Europe. This war in Ukraine was close to Europe and that's kind of a woke up the European countries. And it's good that they woke up. But for us was obviously a big shock in terms of, you know, war next-door neighbors. It's not very pleasant, obviously, and it's not good news. But slowly we realized that, and we thought it would be a big economic shock on Georgia. And we had the different models and macro models, and we thought

we would have a zero gross in 2002, sometimes negative two or negative three, et cetera. But, you know, we humans don't know. We can guess something, but it's like a difficult to know things, what would happen. That's why it's a good thing is to live one day at a time, you know, not to worry too much about the future. But anyway, what we realize,

is that a lot of region has changed the economy of the region changed so if you had like central Asian countries transporting transporting oil and gas and different goods through Russia to Europe they're now using more of alternative routes from through Georgia if you had a so you also had a lot of Russians who we didn't expect that they just left Russia and they moved to Georgia especially in people working in IT industry and then now we are having IT services exporting from Russia to Europe and other countries and with that services we never exported so our labor market changed dramatically labor structure changed dramatically the potential GDP growth most likely changed dramatically so it was big

shift has happened there. Then exports, if you look at, for instance, we have a Heineken, we brew Heineken beer in Georgia and Heineken stopped exporting in Russia. They have 10 brewers there and they stopped exporting from Russia. So they needed the destination. Now we are exporting in seven countries where the Heineken Russia was exporting. So we have a lot of side effects, which caused the Georgian lorry to appreciate from $3.3 to $2.8 to $2.85. And against the euro and against pound, even greater appreciation because we had a big inflow of the foreign currency.

The Georgia's business-friendly environment also helps here. so we have an investment also coming in Q1 was probably not probably Q1 if you look at the foreign investment in Q1 versus the GDP it's a highest ever recorded so you have a big investments coming into the country you have a labor shift labor market shifting structure changing you have logistics changing, you have exports going up, and Georgia did a great thing also to have a free trade agreement with China and EU. There are actually two countries who have a free trade agreement with simultaneously China and EU. It's Switzerland and Georgia. So basically that also

helps because we are exporting exports also stepped up. Tourist recovery was amazing. And I think that the government managed to change the tourist structure as well. We managed to attract the tourists from the high, after the COVID, from high earning countries and high, actually high spenders. So now, right now, in terms of the numbers, we have 65% of number of tourists recovering. So 65% of the 2019 tourists are coming to Georgia in numbers. But in terms of the money spent is more than 100, what we had, more than 100% what we had back in. 2019. So that's why we had it last year we had 10% GDP growth. This year we have 10% plus GDP

growth, real GDP growth. So huge growth. I mean, base was high. So if you look at the kind of recovery in 2019, in Europe, we are a number two after Ireland. So this island is ahead of us in terms of the growth of GDP compared 2019. and then it's Georgia, basically, because we are, we outperformed 2019 by far. And basically the nominal GDP in dollar terms, now it stands around $25 billion. It's a small amount, but before COVID, we were around 17, 18. So this huge growth and the Lari appreciation together created more attractive investor destination for the foreigners.

Besides all the good news, I have to play a bit, Dr. Doom. So how do you see the risk that Russia one day attacks again, Georgia, in this decade? You see, I think that we think we already been attacked and Russia got what they wanted, these two land plots basically, which they have. So I think attacking Georgia again, unless there is a, you know, Olympic sport of attacking Georgia is not I don't think that you know it would be it would happen I mean it's like my view but I think that I think other nations are are more under danger than Georgia because like we are kind of positive Georgia than Ukraine and maybe

then somewhere someone else so we are ahead in that game so you don't see a high likelihood of an attack again I I don't I don't think it's not like Like if you attack Georgia, what you gain, you already have what you wanted from that, right? So I think that there are more things to do than attacking Georgia. You already mentioned that many Russians came to Georgia now. Do we have a rough number? How many Russians are there? To remember for the audience, it's 3.7 million people that live in Georgia.

So even a smaller migration could make a huge difference. Yeah, especially in the industry, which is not present in Georgia. So basically the numbers are somewhere between 80,000 to 200,000 IT specialists. Let's put that way. And even if you have 50,000, basically, you have 50,000, they earn 50,000 dollars a year. That's a 2.5 billion. That's a 10% of GDP. it's a very big number basically even for 80,000.

So if it's 100, then you have like a double of this local. It's like a 20% of GDP. And we already know that you're a good businessman and a good investor. So what opportunities? I'm not sure about that. That's good that you know that. Sorry. Yeah, you've made something with the bank, I think that might be good for some investors as a

criteria. So I claim to say this. what opportunities do you see coming from the migrants to Georgia and how they are already impacting the business of Georgia capital? Yeah, I think that's kind of an interesting, I think very, very interesting opportunity. And there are, I think, the twofold, like immediate. I think that it's exporting IT services.

you need you need it's more supply driven than the demand driven so if you have the good IT teams which you know on outsource people can order their software to be you know built and written etc so we have now that so we can I think that we can you know and we are experimenting with one of our small businesses to export the IT services like coding, for instance, to sell the code to foreign companies by using the IT resources. So that's the one we are looking at. Another one is basically we are in education business and we are in healthcare business and everywhere we need, you know, at tech, etc. and there are people and we have been meeting these people group of people who've been in this industry

and you know we are can build a partnership with with very talented russians who you know can help us to write the to create a new new products new digital products so that's that's that's another opportunity but itself the opportunity of for instance this conflict created a lot of side opportunities in education for instance and we are in in in healthcare business and we are in education business and there is a lot of Asian countries using Ukraine Russia a little bit Georgia was using for medical education in medicine basically and university education and now we are looking

that georgian medical universities are getting flooded and we it's very natural for us we are in both industries to enter the university medical university and export that services we have the doctors who teach and will teach and we have the hospitals where we train and we have everything so and and and the market is huge so we are looking at this opportunity very closely both from education point of view and from the healthcare point of view so so there are a gazillion opportunities we just need to be very disciplined which one to to pick why i like the university because we are already present in both.

And it's much easier for us, I believe. And capex-wise, it's much lighter because we already have the hospitals. We don't need to build this new training centers, et cetera, for the students. And I think we can attract a high caliber students in that industry who want to study in the medicine. Maybe walk me a bit through how you decide between these gazillion ideas and how you decide, like, what comes out at the end of the engine, what really gets the energy. Hey, Tillman here. I'm sure you're curious about the answer to this question. But this answer is exclusive to the members of my community, Good Investing Plus. Good Investing Plus is a place where we help each other to get better as investor day by day. If you are an ambitious, long-term-oriented investor that likes to share, please apply for Good Investing Plus.

Just go to good minusinvesting.net slash plus. You can also find this link into show notes. I'm waiting for your application. And without further ado, let's go back to the conversation. To end the crisis part of the interview, where is your energy coming from in Georgia? like the electricity and the gas and is there a risk for you from high prices so basically we are a big renewable producer we have a lot of hydro and we have a next-door neighbor Azerbaijan with whom we have a long-term contracts and we have a very friendly relationship with

Azerbaijan and we have a the gas is coming from Azerbaijan and renewable energy mainly is local and with some gas turbines which are fired with other gas. So we have not had the Russian gas I don't know how for how many years. So we have diversified 15 or 20 years ago. Yeah. That's what we will also do. But yeah, it's a painful thing. Let's jump a bit to your NAV and the NVV calculator later on the website here in the video. You will see this and that there is a nice tool you have on your website,

which you can also find by the link below. And a way you can somehow work around your NAV of Georgia Capital and get an idea how you define the values you have. But when I talked to other investors, there was always a question how trustworthy this NAV is. And like, let me frame this into the question is, how do you work on making these numbers, which are NIV, which are calculation numbers,

like real money numbers at Georgia Capital? So basically, we do the DCFs. I mean, we are not, you know, we are not inventing the will there right so we do the cfs we compare to the multiples international multiples and that's how we come up i think that one the best way to do it's to actually realize the value and see whether people are willing to pay that n a v so the last transaction which we did to realize the water utility value was 30% premium to our naiv So if we are trading at 60% discount to our N.A.V.

It's, I don't know, we sold three times more valuation that the investors are valuing our water utility business. So, but then investors say, we don't believe it anyway. So that's how we are. You are still at 60% discount to NIV. So we are enjoying the NIV discount. How do you come to the peer multiple? Like, what is your process of picking the right peers, for instance, in the hospital space?

So mainly the DCF driven, the cash flow driven, the whole, the multiples are more kind of a check. And we have a Doves and Phelps, the third party evaluator who comes and does the value. And then E&Y who signs off on that. So basically we have a lot of third parties who are doing that. And I think that the DCF showed it. I think we are conservative. That's why we sold a 30% premium. Let's put that way, you know, for there is a control premium which we are not valuing.

For the strategic investor to come and have a control of the company, they pay for that, obviously, and that's not valued in our NAV valuation, the control premiums. I think whatever we sold, it was always at NAV or above NAV. The commercial real estate businesses which we sold, it was not big, but it still, it was, you know, it was above the NAV. I think it was 40% above NAV. so one important driver to to raise the value you have there is this strategic investor so where do you find them and how do you approach them and yeah we don't find them they find us so so so so so so so basically the um there is a lot of hanger for for good quality high growth well run well institutionalized companies there is a big hunger for that and i think that the uh i think that we we've been approached all of the our companies

we have in our portfolio we had credible buyers approaching us talking to us and you know sometimes we don't talk sometimes we talk etc but you know we said okay you know we saw that we saw that we had a good interest on this water utility business from different buyers from different bidders and in the end we decided to go along with the current one aqualia who bought this asset and we are very very very happy with this transaction with the partnership we are happy that the the investment value has been growing also so i think that the investors are very happy because we had that on our when we sold our 20% stake what we are what we have retained in the company was valued at 45 million dollars

and now in two quarters it's went up to 55 million dollars it's a value because the companies gross of EBITDA and casuals, etc, are actually the more than we expect it. Due to the energy prices going up, it has a new energy attached to it. And plus, we have the, you know, appreciation of the DeLari. So that's kind of a, you know, just so we don't, we don't find that they approach us. And then we talk and that we engage or don't engage or whatever. Maybe can you walk us if you're allowed to do this a bit through the de-sale of the water asset? Like what assets did you have there and when, yeah, like when the buyer approached you and how the buying process worked for that?

So, yeah, maybe I cannot say every detail, but I can try to talk what I can. So basically we announced in November 2020 that we want to realize the value of one of our large investments in order. to, in this way, we thought that if we put the value at NIV or above NIV, you know, that would help to eliminate the discount. So as soon as we said that, we had multiple approach for our portfolio companies, so large investment portfolio, and for other investment portfolio as well. So we had, we had like a lot of incoming inquiries. And actually, I didn't realize, but it was good to,

good approach to if you want to sell something if you say like I'm not selling we didn't say what exactly we are saying we said that you know portfolio in that large portfolio one of that we will sell so it was a very good exercise because we saw a lot of

interest for different assets so we didn't realize that you know it was but it was a very very very good approach and we have God bless And we had a lot of incoming inquiries.

And since we had an inquiry inquiries, we started to talk and there were some credible parties, not very credible parties, et cetera. So we started to spend some time and educate them about the business. We had some management meetings. Management was also incentivized properly on the sale. That's important, basically. And as we, you know, walks through and we were getting no binding. bits and then we were moving on to binding bits etc so it was it was interesting process actually so we never sold before in private transaction we had a lot of

public deals but large private transaction we did smaller private transactions obviously but with strategic we haven't done it before and it was it was very interesting learning but actually it's much simpler than people think it's like when the deal is finished and the money is on your account is the the relationship with the asset over because i think in this case it was a japanese buyer if i'm not totally wrong that bought the asset and the management of it is also like something that has to be done on the ground and do you still have an involvement there is this kind of service company maybe for the buyers of assets No, on the water utility, the Spanish company bought it.

Sorry, sorry. Yeah, yeah. So on water utility, basically, we are a 20% shareholder there. We have a put option from 2025, but we are the partners. We sit on the board. We work together. We actually, you know, we have a very intense meeting, et cetera, and it's actually a very fruitful partnership. I think that that Aqualia wanted to have a partner.

a local partner to guide them and we are we are very happy partners with with aquility actually it's it's so far we have a very very good partnership so and i think that's kind of a probably recipe for our strategic guys to come in and we help them in the beginning with our minority shareholding to get no some may not want but but that's also a kind of a service we offer in a way. It's part of this deal, I guess. And we have a shareholder agreement and we obviously obey this agreement, both parties. And that's that's kind of a, you know, pleasure actually to have such a knowledgeable partner

because we are learning more. And as I mentioned, I love to learn. I also would love to learn a bit about, like, how you use the cash proceeds you get from the sale. And, like, general, there is, like, free options, like, reinvest into the business, payback debt or do buybacks. So how did you decide in this case? And you already mentioned that, that, like, the debt levels you have weren't, like, that happy for you? Tell me a bit more here. so we have a most difficult question probably for me is you know how you allocate the capital between

these three you know investing buying back buyback is also investing and we are buying our own that's how we look at it we are investing in in georgia capital basically and the leveraging and that's where we have put up in May we had an investor day in London and we have put up this framework where we how we allocate the capital between

these three. So basically we have this NCC ratio what we call it's a net capital commitment which is basically a ratio of net debt plus investment commitments what we have, these are the off balance sheet investment commitments, and then we divide the divided ratio to the portfolio value. And we say that the combination of this tool, you know, the net debt and the committed investments should not be more than, if it's close to

15%, then we are more bullish in buybacks. So if it's if this, if this, if this, This one is about the 15 and now it's around 23. You know, we are actually, we are okay to do a little bit bybacks and the leveraging is more kind of a on the agenda. So if this ratio is towards the 45, we don't do a buybacks, we just deliver each aggressively. So basically, so this is a kind of a knob, volume, but where we are in terms of how aggressive we are on one buybacks.

and how aggressive we are in terms of deleveraging. So right now we are in a middle territory where we are doing a little bit of buybacks. We passed actually 12 months. We did a buybacks of $25 million worth of stock we bought back. And we are buying back some more. So we are kind of in a mode of volume is not high up on the buybacks.

it's a little bit down and and on the investment side also we are trying to to limit the investment so our investment portfolio is it's what we have identified education renewable energy and the outpatient clinics basically which outpatient clinics is actually generating enough cash to do reinvestment itself and we are not investing there and the education and renewable that's where the Georgia capital is a investor is putting up the money. Actually, I want to just underline here that all the reinvestment, what our portfolio company does, we at Georgia Capital, we need to sign off on that. So it's not an investment committee decides on that.

So management is not, management has a full delegation into the operations, but when it comes to the capital location, that's where we're coming, that's where we step in. how do you think about dividends at georgia capital so i think that for us dividends as long as we can generate a big increase the nabee per share by buying bags by buying back the shares i think that's what we will do but as long as we is as long as this discount closes down then we will be thinking more into the industrial dividends the let's say the sustainable dividend capital return policy for us can be done as soon as we take care of the leverage basically in 2024 we will be repaying the bond and that's where we want to decrease leverage

significantly and since we will do that the cash flow was generated by operating company is not reached to our investors because there's a debt in between. And I think that as soon as we take care of this debt, I think that that's the dividend policy can be introduced. But I think that I would call it more kind of a capital return policy, which would say that we have an option to buy back or give you a cash. So every six months, probably, you know, that's where we need to be. We decide or we are buying back or give you cash.

but investors will have a visibility on the amount of buybacks or dividends that will receive. Right now they don't. Right now we are very opportunistic and we just say, you know, we come out and say, okay, we have a $5 million, $10 million buyback program and we switch on and switch off it. So it's we cannot commit because of this debt what we have and we cannot commit to kind of a continuous and progressively with capital return policy right now. But we hope we will soon after the leverage. Thinking about debt or leverage, what is the sustainable level you want to keep in the future?

Or is there any metric you think that should be the future key metric or the future key range? I think that so for us, if you look at the debt and the capital commitment, of balanced commitment for us is the same in a way. So we want this tool not to be more than 15% of our portfolio value. So right now our portfolio value is around $1 billion. So I think $150 million of debt, net debt and capital commitment that at the given time is a conservative well-balanced numbers, for instance.

You know, we should not commit more than $150 million to invest at a given time, or we should not have a net debt of combination of the debt and the committed capital. We should not have more than 15% on right now is $150 million. That's kind of the way we think that we are comfortable, and that's the kind of an area historically where we think that this is a comfortable level of debt and the capital commitments together. So we've been conservative here because capital commitments you may change and you say, I don't want to commit that capital.

But also, this is good for us for our discipline. So we need to manage ourselves as well. So it's good for our discipline that we don't commit too much in terms of the investment. So we are in proportion to our portfolio, we are not aggressive in terms of the investments and commitments before we close the interview maybe let's jump at the renewables which we haven't discussed really in details how do renewables fit to your like more asset light approach in the company because it's like it it does not we had that one so asset light we announced in may and it's not the something which fits right now we were committed to build some projects so it's very difficult

to recommit if you are in process of building, etc. But we need to solve this puzzle as well because it's not part of our core strategy. Can you do a lot of like, do you need a lot of equity to build renewables in Georgia or is there also like in Germany, many companies can just like take capital from the bank and build renewables because the cash flows are so plenable?

you would need to put up some equity here in Georgia you do you cannot do only with the bank but we can also do this business which is a very good business do a third party money and be like a manager or have a partnership where you don't commit that much such as I bring more debt and you do it more asset or equity light way so we are working on that to solve that puzzle but this is something which is on top of our agenda how we're going to go about renewables right now in our ncc ratio when i say it's with

23 or 24 percent it includes the commitment to invest into renewables so if we if we manage to solve this puzzle in a way that either we are managing we are in partnership or have you, we may not, this committee will fall out and which would improve the ratio, which would allow us to do more buybacks in a way. So what is your strategy in renewables then if it's, or if it's still evolving, you can also say it's still evolving at this point of time? No, no, I think that number one, the goal would be to stay in the business, But generate more like a fee income out of it, be a manager rather than as a Georgia capital, being as a manager rather than investor.

Maybe stay as an investor, whatever we have invested now and we have some investment, but then we manage other people's money as well. And that's where we make the returns and the fees and the return sharing or carry sharing, basically. That's another approach what we think we can take. But we don't have a final solution yet. So I don't want to just say too much that we don't, we haven't arrived, but we are working. It's on our top of the agenda that we make this renewable energy asset light. So we started in the early 1990s, and now let's jump a bit to the future.

Let's maybe think about the year 2027, like in five years. How likely is it that you will still be CEO of Georgia Capital then? Well, for sure, I will not be CEO of Georgia Capital. I will be chairman. I hope anyway. So I, so, but I, look, I'm, I enjoy what we do. And basically, I think that this company, the Georgia capital as a asset, as a capital allocator, I think I can contribute as much being a chairman as I am a CEO now, because it's not the way we run these

companies. It's basically you need to be really hands off from the operating companies. And I think that being a chairman, and we can have this. capital allocation strategy which is appropriate and then i can do it uh you know not full time to be honest and i think that investors also will be happier that they can get uh you know cheaper version of me so how will you go about finding the new ceo then will it be the person that came across to you honestly and said this is a mistake and this is a mistake or what is like the search formula you will do in this case i don't want to jump ahead but i think that uh people who tell you that who are courageous enough and care enough to tell you what mistakes you make i think that's a

very big value and that's obviously obviously will be valued that individuals or group of individuals basically who are open Is it likely that the person will come out of Georgia Capitals team or maybe it's if you don't want to say anything here it's also okay. No no no I think I think the more likelihood to come out from

the Georgia Capital team than not to be honest or from the group basically and then think about like the line of businesses in 2027 what might be new businesses under the umbrella of Georgia capital

So that are in the scale of bigger businesses. In 27, for sure, we got our education business could be the largest one in our portfolio or close. It will be large for sure, but I think it will be big for sure. I think another industry which I like a lot and it's in our other business. basically and we are really testing the management there and it's auto services which is totally which is fragmented there's one large player and then it's totally fragmented basically I think that to make there and number two player is a big industry big sector I think that that also resonates to our ability to consolidate fragmented sectors grow in the

service industry so it's kind of our bread and butter So that's another one which I think that could become an upcoming investment company, investment stage company, basically. And that's where we might be investing in the future. Could be that. I think that clinics and pharmacies will go outside Georgia. as we as a Georgia capital do not invest outside but our asset light businesses are encouraged to go outside of Georgia and I think that we will have pharmacy chains and we are building also the franchises so so we take a lot of franchises for instance we are we have a franchise of body shop

for instance right and we'll be growing outside Georgia in in Azerbaijan, Armenia and maybe other as well with this pharmacy chains and with franchise shops I think the polyclinics which are also asset light basically we can grow this one into the region we may grow we may start growing our education business in the region so there are a lot of opportunities to for asset light businesses to go outside. So that's how I, in five years time, I think education business will be big. I think the polyclinics business, claims will be big as well. I think that pharmacy will be, pharmacy, we are already outside a little bit, but it will be regional. Our pharma will be regional player,

for sure, strong regional player, basically. And it will be very attractive for big strategics, because with one go they can cover the whole region basically I think that polyclinics and the schools will be open for sure in the region our lab which we just got the JCI accreditation in the region is only JCI accredited lab will be also regional player And probably we would exit one of our large investors. I don't know which one. I don't want to name, but probably we'll...

It's not a good strategy. Your reason. So probably we will exit one of this and then we will have a, as I said, the auto services maybe, I don't want to jump ahead, but going into the investment. stage company. So the next five years, we are pretty busy, I think, in terms of the growth. And we can generate a lot of growth with very little capital commitment, to be honest. I think. And sorry, we will have a capital return policy in place, probably.

I've asked all my questions. Is there anything you want to add for the end of the interview we haven't discussed that comes to your mind or like? No, no, it is. actually my first podcast ever. I enjoyed very much and I want to thank you for such a great interview and such a good engagement and such great questions. I think it's an excellent

time I had with you. Thank you. Thank you very much and I also enjoyed it. And thank you for the audience for staying till here and bye bye at this point till the next interview. But as in every video also here is the disclaimer you can find a link to the disclaimer below in the show notes the disclaimer says always do your own work what we're doing here is no recommendation and no advice so please always do your own work thank you very much