Georgia focused investment platform - Unlocking shareholder value

Our story


Bank of Georgia is a leading universal Georgian bank, which is well positioned to benefit from the underpenetrated banking sector in Georgia through providing best in class services.

Two key metrics we use to measure Banking Business performance are: (1) Return on Average Equity (ROAE) targeted at 20%, and (2) 15%-20% growth of our loan book. Bank of Georgia is also well positioned in terms of both capital and liquidity to deliver on its growth strategy.

We have two segments in the Bank, of which Retail Banking will drive most of our Banking Business growth. In Retail Banking we aim to harness our optimised branch operating model to effectively serve each target segment of our emerging, mass and affluent clients based on their needs. In Corporate Investment Banking we have successfully achieved our risk de-concentration and loan portfolio repositioning targets and intend to resume the corporate loan book growth, as well as increase the share of fee and commission income in the medium term. Going forward, we expect the growth of the total loan book to be balanced between Retail Banking and Corporate Investment Banking. In Wealth Management, under Corporate Investment Banking, we will focus on strengthening and promoting our regional private banking franchise.

The Bank is well positioned to become a regional finance centre, where high net-worth individuals are confident to deposit their funds.

The Bank’s strategic priorities are:

• In Retail Banking, to increase the mass retail product to client ratio from the current 1.8 to 3.0 in the next two years
• In Express Banking, to double the number of transactions over the next two years
• In Solo Banking, to increase the number of Solo clients to 40,000 by the end of 2018 (currently 32,104)
• In Investment Banking, to develop a significant regional private banking franchise to reach AUM of GEL 2.5 billion by the end of 2020 (currently GEL 1.9 billion)

In addition, over the medium-to-long term:

• The net interest margin is expected to exceed 7% (currently 7.3%)
• The Bank aims to manage a cost to income ratio of around 35% (currently 37.7%)
• The Bank will enhance its already prudent risk management practice, and will aim to maintain its Non-Performing Loans coverage ratio in the range of 80%-120% through the economic cycle (currently 92.7%) – with a normalised ratio of 100%
• Through the long-term economic cycle, the Bank’s cost of risk ratio is expected to be c.2.0% per annum (currently 2.2%)
• The Bank aims for its dividend payout ratio to be in the range of 25%-40%. Implementing our strategy successfully should improve the quality of ordinary dividend generation capabilities of Bank of Georgia and make it more sustainable over a long period of time.


Over two million retail clients

Over the past decade, Retail Banking demonstrated a stellar performance by reaching 2.3 million clients, delivering on loan book growth and ROAE targets. While we were targeting this milestone, the Bank was product-centric with a focused client acquisition approach. Having attracted over two million clients, we now target growth through increasing product to client ratio.


In order to better connect with and efficiently serve the various segments of the retail client base, Bank of Georgia operates a multi-brand strategy.

We began implementing our Express Banking strategy in 2012 by rolling out small-format Express branches offering predominantly transactional banking services to clients through ATMs and Express Pay terminals.
Out of the total current network of 281 retail branches, 156 have been transformed to Express, while a remaining 12 will follow in 2018.

Under the Bank of Georgia brand we target the mass retail segment. This is our flagship brand and the most significant profit contributor. By the end of 2017, we completed the transformation process of our Retail Banking operations from a product-based model into a client-centric model, as well as the implementation of the client-centric model in our branches. As a result, 86 out of 113 mass retail branches now operate on a client-centric service model.

In April 2015, we launched Solo – a fundamentally different approach to premium banking. The Bank’s Solo clients are given access to exclusive products and the finest concierge-style environment at our specially designed Solo lounges. They are provided with new lifestyle opportunities, such as exclusive events and handpicked lifestyle products.

Continued investment in digital penetration growth

We are actively investing in information technology solutions in order to increase digital banking penetration for our services. In 2017, we launched a new fully-transformed, user-friendly, multi-feature mobile banking application – mBank – which continues to gain popularity. Since its launch on 29 May 2017, and over the course of the following seven months, over 261,000 downloads were made by the Bank’s customers, while the previous application had less than 120,000 downloads since its launch. C.3.88 million online transactions were performed during the same period using the new application. The number of transactions have increased by c.140% since 2016.






Our Express Bank brand is aimed at the emerging bankable population. Express serves as a platform for bringing the currently under-banked population into banking and its main focus is to enable its client base to transact in a fast and easy way.

In 2017, we installed 113 new Express Pay terminals, resulting in 2,842 total Express Pay terminals at the end of the year. We are leaders in Georgia in the payment systems market.

In 2017, we won a tender, organised by Tbilisi City Hall, for the modernisation of the public transportation payment system in Tbilisi. As a result, the Bank will continue to be the sole provider of payment support services to the public transport network, and operate Express branches in Tbilisi metro (i.e. subway) stations for the next ten years. As part of the tender mandate and the Bank’s own digitilisation strategy, Bank of Georgia will implement a modern digital payment system across public transport network in Tbilisi, including payment processing using Visa and MasterCard cards, and create a digital platform for ticket reservations and purchases through mobile applications. The Bank’s branch network presence in public transport services contributes c.2.1 million transactions per month.

We issued 388,567 Express cards in 2017 and had 1,258,940 Express cards outstanding at the end of the year. In 2017, the number of clients served and number of total transactions through Express cards increased by 48.3% and 15.2% y-o-y, respectively. We sell only a limited number of banking products to our Express Banking clients. Currently, 106 out of a total of 156 Express branches are located in Tbilisi.

Nowadays, Express is the major growth driver in our fee and commission income from the Retail Banking segment and a strong franchise attracting the unbanked population to the Bank, eventually growing them into mass retail customers.


Under the Bank of Georgia brand, we serve mass retail clients, for whom we have successfully optimised and redesigned the operating model of our mass retail branches around a client-centric approach. Mass retail is the largest segment of Retail Banking, where we aim to increase the product to client ratio from the current 1.8 to 3.0 in the medium term.

In 2017, we accelerated proactive interactions with our clients by advising and offering them the financial products and solutions that best serve their individual needs. We continue to see strong growth in sales volumes and the number of products sold to our clients in transformed branches, contributing to 29.3% y-o-y growth in the retail loan book. The number of products sold to mass retail customers has increased by 163.0%, compared to the sales before transformation of the retail segment.

In order to unlock the full potential of current customers and boost a product to client ratio, we launched a new loyalty programme called “Plus+” in 2017. The programme is part of the mass retail customer-centric approach and offers the customers different status levels and reward points. They accumulate based on their business with the Bank and can redeem points with partner companies’ products and/or services. At 31 December 2017, the number of upgraded members reached 159,781 and active Plus+ cards outstanding were 250,307, while the total number of members grew to 586,870.


The Solo brand is used for servicing the emerging mass affluent segment. Our new Solo model was introduced in 2015. It is a fundamentally different approach to premium banking. As a part of the new strategy, the Bank’s Solo clients are given access to exclusive products and the finest concierge-style environment at our specially designed Solo lounges and are provided with new lifestyle opportunities, such as exclusive events and handpicked lifestyle products.

To qualify for Solo services one needs to have an income of GEL 3,000 per month. At Solo lounges, clients are attended by personal bankers and, in addition to the banking products, are offered luxury goods at cost and other lifestyle offers including a travel magazine and entertainment. In 2017, Solo organised concerts with world famous artists. Such events are limited to Solo clients and create additional interest in the Solo franchise. Profit per Solo client reached GEL 1,704 in 2017, over 24 times what we have in the mass retail segment under the Bank of Georgia brand. Solo’s gross loan book and deposit portfolio demonstrated impressive growth of 44.7% and 37.4% y-o-y.

We are well on track to achieve our target of 40,000 Solo customers by the end of 2018, from the current 32,104. The share of new customers acquired in 2017 accounted for 43.8% of the total of Solo clients at the end of the year, which clearly demonstrates the growing popularity of the franchise in our domestic market.

In 2017, we launched Solo Club, a membership group within Solo, which offers exclusive access to Solo’s products and offers ahead of other Solo clients at a higher fee. This includes American Express Platinum cards, which were also launched in 2017 and are available to Solo Club members only. At 31 December 2017, Solo Club had 1,882 members.

Solo is actively diversifying the range of its lifestyle offerings in travel, entertainment, education and well-being to make the franchise even more distinguishable and enjoyable.

  • Georgia Capital
  • GGU
  • m2
  • Aldagi
  • Teliani Valley
  • GHG


Georgia Capital is a Georgia-focused, well diversified investment company targeting minimum IRR of 25% from its investments.

Georgia Capital seeks to capture growth opportunities in the sectors in which it currently operates and drive the development of new structurally attractive, high-growth businesses in Georgia, which it intends to add either by acquiring businesses in their early development stage or by establishing greenfield businesses, often consolidating fragmented or underdeveloped markets. Georgia Capital actively manages its portfolio companies to maturity, setting the strategy and business plan of each business and driving its execution. In order to unlock the value of the companies in which it invests and which it manages, Georgia Capital sets an exit strategy prior to making an investment.



• Highly disciplined investing approach. The Georgian economy entered into a period of significant development and growth approximately ten years ago and different sectors and businesses are at an early stage of formation. Access to capital and management personnel is limited, owners of businesses are cash poor and, as a result, Georgia Capital can pursue attractive investment opportunities and acquire assets on relatively attractive terms with a view to consolidating fragmented and underdeveloped markets. Because the company is under no time pressure to invest, it takes a selective and opportunistic approach to new investments. Georgia Capital’s capital return policy is a natural self-discipline mechanism for its capital allocation decisions.

• 360o analysis when evaluating capital returns, new investment opportunities or divestments.                         

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 can focus on shareholder returns and on opportunities which meet its investment return and growth criteria. The company targets a minimum IRR of 25% for its existing and new businesses, to buy back and cancel its shares and/or pay special dividends linked to exits from its existing businesses and new investments.

2.MANAGING PORTFOLIO                              COMPANIES

Georgia Capital sets the strategy and business plan of each business it acquires or establishes and then actively manages their implemen-
tation, particularly at early stages of develop-
ment. As the availability of management personnel is limited, by developing top talent in Georgia the company can add value for the company’s shareholders. Investing time in growing and developing management continues to be critical for the success of the company’s strategy.

Georgia Capital will apply a hands-on management approach to the non-public portfolio companies at early stages of their development and acts as an advisor for the management of more mature companies. In the publicly listed companies, Georgia Capital will be represented on the Board at least until its ownership stake falls below 25%.


As a business matures, Georgia Capital will normally seek to monetise its investment, including through initial public offering, strategic sale or other appropriate exit, typically within five to ten years from acquisition. As investments are monetised, Georgia Capital plans either to redeploy the proceeds to capture opportunities for growth in new sectors or in the company’s existing businesses, or return proceeds to shareholders in accordance with its capital return policy.

• Cash preservation is a key target for Georgia Capital and therefore two thirds of total operating expenses are related to share-based compensation
• Georgia Capital’s senior management’s compensation will be paid in long-vested shares only, with no cash component
• Portfolio company management will be paid in proxy shares of their respective companies



GGU has a significant opportunity to increase its operational cash flow over the next few years from a combination of improving cash collection rates, growing cost efficiencies from cutting technical and commercial water loss rates, and reducing energy consumption internally to preserve the supply available for sale to third parties, while also planning the construction of hydro, wind and solar power generation plants.

GGU is an established business with two business lines – water utility and electric power generation. In its water utility business, GGU has a natural monopoly that supplies water and provides a wastewater service to 1.4 million people (more than one-third of Georgia’s population) in three cities: Tbilisi, Mtskheta and Rustavi. GGU is self-sufficient in its power usage for water transportation and invests in additional capacity for electricity generation with the goal to establish a renewable energy platform.

GGU has been investing heavily in its infrastructure, thereby replacing the depreciated asset base over time and achieving continuous growth in the Regulatory Asset Base (RAB). GGU plans to invest at least GEL 200 million over the next three years in the upgrade of existing and the development of substantial new water utility infrastructure. GGU’s Investment in infrastructure is expected to significantly improve the rendering of water supply and wastewater services to customers and achieve cost efficiencies through reduced water losses. In 2017, GGU’s regulatory body approved increased tariffs for water supply and wastewater services based on a new methodology, which is in line with international best practices. New tariffs provide fair return on investment, as well as compensating for eligible operating expenses.
In 2017, GGU commenced construction of a 50MW HPP in North-Western Georgia (Svaneti region) with a target to have the HPP operational in December 2018. Construction of 2.5MW Bodorna HPP also started in 2017, which is expected to become fully operational from September 2018. Moreover, 44.3MW Zoti HPP in Western Georgia (Guria region) is currently under development with a target to complete the construction of this plant by the end of 2020. c.100MW wind projects are currently at the feasibility stage and once complete, GGU expects to commence construction works.

The key elements of GGU’s business strategy are outlined below:

• Reducing water loss rates and increasing energy efficiency. GGU aims to achieve efficiencies in operating and maintaining its network by heavily investing in the refurbishment of its existing and the development of new infrastructure. As a result, GGU plans to substantially reduce technical and commercial water losses in the medium term, thereby reducing water and energy consumed internally. Asa result of achieving efficiencies in its own energy consumption, GGU expects to free up electricity for third-party sales. GGU intends to achieve additional cost efficiencies through reduced maintenance costs for existing water infrastructure, which management expects to result in increased profitability
• Establishing a renewable energy platform. GGU plans to establish a renewable energy platform by developing hydro, wind and solar power plants. Currently, GGU owns and operates 149.3MW installed capacity, has c.100MW HPPs at a construction stage and c.100MW wind projects at feasibility stage. Additionally, GGU is constantly identifying new renewable projects that it aims to develop in the medium term
• Preparing for IPO in the medium term. As part of preparing for a potential IPO, GGU aims to achieve EBITDA of more than GEL 115 million in 2019. GGU plans to use IPO proceeds to fund new development initiatives, including renewable energy projects

GGU has been successfully growing EBITDA and reaching its targets for several years in a row and the company is well on track to further increase it to more than GEL 115 million in 2019 by increasing its renewable energy portfolio and tapping into additional efficiencies in the water business. Strong and stable cash flow generation is expected to enable GGU to sponsor steadily increasing dividend payouts to shareholders and to prepare the combined utility and renewable energy business for an IPO in approximately two to three years.



m² Real Estate develops residential and commercial property, including hotels, in Georgia. Over the past ten years, m² has established itself as one of the most recognised and trustworthy residential housing brands in the country. m² is also in the process of building on its strong market reputation, vertically-integrated operating model and brand franchise to create a third business line that develops third-party land plots and generates fee income. For the next three years, the main priority for m² Real Estate will be to target an internal rate of return of 40%+, whilst delivering a capital return of US$ 25 million in 2020 by:

Developing remaining residential land bank. As a residential real estate developer, m² targets mass market customers by introducing high quality and comfortable living standards in Georgia and making them affordable through its well established branch network and sales force. The total value we are aiming to unlock from the remaining residential land bank by 2020 is US$ 27.8 million with 4,690 apartments (in addition to 217 remaining apartments to be sold in the existing 11 projects, both completed and ongoing). m² does not expect the land bank to grow, as the company’s strategy is to utilise its existing land plots within three to four years and, in parallel, start developing third-party land plots under franchise agreements.

Franchising real estate development in Georgia. m² focuses on franchising its well established brand to develop third-party land plots and generate a fee income. While following its “asset light” strategy, m² will capitalise on its:

Strong brand name. m² enjoys 92% customer brand awareness among real estate developers in Georgia
Pricing power. Under m², apartments can sell at a higher price than under other brands. m² has development expertise that the company uses to achieve efficiency in planning and design stages, which drives revenues as well as margins. Moreover, owing to a vertical integration of its construction arm, m² has control over the largest part of a development’s cost base, which enables m²
to achieve construction and project development efficiencies
Sales. m² is distinguished by its ability to accomplish strong sales performance through dedicated sales personnel and access to finance. Pre-sale reduces the equity needed to finance the projects. The top three banks provide mortgages under the m² completion guarantee
Execution. m² has an excellent track record for projects completed on time and to budget. The company manages the entire process from development and construction through to apartment handover and property management services
Access to finance. m² has successfully cooperated with Development Financial Institutions (DFIs), has also been active in local fixed income instruments market and has issued Dollar-denominated bonds in the local market. Since 2012, m² has raised approximately US$ 100 million of debt financing, of which US$ 45 million is from international financial institutions

Growing yielding business. m² will continue growing its yielding asset portfolio through:

Commercial space: enhancing the income generating asset portfolio by incorporating commercial elements in its residential developments and opportunistically acquiring and/or developing high street retail, commercial and office space. In addition to rental income, these assets can also deliver capital appreciation
Hotel development: m² launched a three-star Ramada Encore hotel in Tbilisi under Wyndham’s seven-year Ramada Encore brand exclusivity in February 2018. The company is currently constructing a four-star Ramada hotel in the centre of Tbilisi and another three-star Ramada Encore hotel in Kutaisi is in pipeline. Both are expected to launch in 2019. All Wyndham brand hotels cater to the growing number of budget travellers and will offer c.400 rooms in total by 2019. m²  finances the equity needs of the mixed-use hotel from the profits and land value unlocked through the sale of the apartments in the development. The Ramada four-star hotel in Tbilisi will be constructed in-house by the company’s recently acquired construction subsidiary. In addition, in 2017, m² acquired a controlling stake in a lifestyle boutique hotel, which is expected to launch in 2019

Construction management. m² Real Estate historically outsourced construction and architecture works and focused on project management and sales. In 2017, m² acquired BK Construction LLC, a local real estate construction company, with the aim to bring the construction works in-house and achieve cost and project development efficiencies. m² plans to fully utilise the benefits of this vertical integration and boost fee income generation from franchise deals and third-party constructions.



Over nearly three decades in the Georgian P&C insurance market, Aldagi has achieved almost universal brand awareness, leading positions in retail insurance services, the largest product portfolio and exceptional financial strength. The company has doubled its retail portfolio over the last three years, outperformed market growth by 5% and achieved a ROAE of 38.5%. Based on the latest available market data as at 30 September 2017, Aldagi continues to be the most profitable insurance company in the local market with 89.4% share of the insurance industry profit and a market share of 38.6% based on gross premiums earned.

The current low level of insurance market penetration in Georgia (1.2%, of which 0.6% relates to P&C insurance and 0.6% to medical insurance) provides enormous potential of growth and Aldagi is well equipped to capture these opportunities.

Aldagi aims to triple its current net profit and become a GEL 50 million net profit company by 2022. The company plans to achieve this by strategically focusing on each of its three main business lines set out below:

Retail customers. The Georgian retail insurance market offers ample room for growth, as most of its potential is yet to be unlocked.

Motor insurance accounts for 50% of the total retail insurance market in Georgia, of which Aldagi’s share is 42%. The motor insurance segment has great potential to increase, as only 4% of registered cars are insured on the local market. Moreover, compulsory Border Motor Third Party Liability (MTPL) insurance will be effective from March 2018, and Aldagi expects it to increase the size of the existing P&C market by approximately GEL 30-50 million (15-25% of the existing P&C insurance market).
Furthermore, a new law requiring a mandatory local MTPL for all vehicles registered in Georgia is expected to launch in 2019 and significantly boost retail market penetration.

In 2017, Aldagi actively worked on developing new products and introduced livestock insurance to underpenetrated rural areas. The company came up with an online travel insurance product, with a unique combination of coverage and competitive pricing. Aldagi partnered with Public Service Hall, whose clients can electronically acquire affordable insurance for any property registered on the public registry.

Aldagi aims to further strengthen its market leadership position by harnessing its digital insurance platform over the next five years. The company intends to execute all of its processes and procedures, including issuance of e-policies, remote claims regulation and building web/mobile customer profiles, principally through digital channels. Aldagi plans to increase the percentage of retail sales conducted online to approximately 20% of total retail sales, and the percentage of motor claims processed online to 25% of total motor claims.
The company actively diversifies its distribution channels by forming partnerships with financial institutions. Extended cooperations with leading financial institutions in Georgia will enable Aldagi to uncover additional sources of high quality deals for its leading insurance products and continue to successfully diversify its multi-channel distribution network.

SME segment. Georgia’s insurance market for small and medium sized enterprises is currently in its infancy. Aldagi’s strategy is to focus the attention of its experienced retail sales force (in addition to the corporate sales department) towards entering this underpenetrated segment. Aldagi sees significant potential to grow this segment of the portfolio by developing tailor-made products and providing them through digital portals, created especially for SME clients, and its multi-channel distribution network.

Large corporates. Although the level of insurance penetration within the corporate segment is relatively high compared to retail and SME segments, a combination of favourable Georgian macroeconomic conditions, a good investment climate, stable economic growth and an increase in infrastructure projects will further increase customer demand for insurance products.



Teliani Valley aims to become a leading beverage producer and the biggest distribution company not only in Georgia, but in South Caucasus. The company is well equipped to leverage its strong existing production and excellent sales and distribution franchise.

Teliani Valley is an established leading beverage producer and distributor in Georgia with three major business lines: wine production, beer production, and distribution of its own and third-party brands in Georgia.

The company is a leading wine producer in Georgia, selling around 3.5 million bottles of wine in 14 countries globally per annum, with about 68%* of its revenue coming from exports. Teliani intends to not only retain its leading position on the local wine market, but also to become a top exporter by 2019. Teliani aims to grow its domestic and international wine sales by benefiting from favourable market trends in Georgia and expanding exports through new sales channels in high-growth countries, including China.
Teliani has an established distribution franchise, which has contracts with a number of international beverage brands. Teliani plans to diversify the products in its distribution portfolio and eventually become the largest third-party distribution company.

Teliani’s strong production and distribution franchise led the company to establish a partnership with Heineken. Teliani will produce Heineken brands in Georgia under a ten-year exclusive license agreement and sell them in the countries of the South Caucasus region (population of c.17 million). Teliani is well on track to brew Heineken and Krušovice Beers in its brand new brewery in 2018.

In line with its strategy to diversify its distribution portfolio, Teliani obtained
exclusive rights to import and distribute Lavazza coffee in Georgia, and won other non-alcoholic beverage distribution contracts in 2017.

In 2017, Teliani launched production of a lemonade and local mainstream beer. The newly launched beer “ICY” was well received by the local market, which immediately earned 97% brand awareness and 16% market share upon launch. Both products are planned to be exported to CIS countries.

Of the US$ 49.3 million investment in the beer project, US$ 29.5 million is equity, of which US$ 23.3 million is BGEO’s share. Teliani expects EBITDA to grow to c.US$ 5.5 million in 2020, up from the current US$ 0.6 million, with growth primarily driven by the expansion into the beer segment.



* The results are presented excluding the IFRS 15 impact.


GHG will continue to focus on building its presence throughout the Georgian healthcare ecosystem, while also focusing on enhancing its margins and achieving higher intergroup synergies through various cross-selling initiatives. GHG’s strategic priorities are set out below.

In the hospitals and polyclinics business GHG’s aim is to:

• Rebound healthcare services EBITDA margin up to c.30% in the medium to long term
• Achieve a c.25% market share by revenues and c.28% market share by beds by 2018, and 30% market share by both in the long term (currently 21.0% share of revenues and 24.5% share of hospital beds)
• Roll out a network of polyclinics to achieve a c.5% market share of revenues in 2018 and a 15%+ market share of revenues in the long term (currently 2%)
• Enhance digital channels

The key strategic focus in the hospital business over the next few years will be to enhance the company’s footprint in Tbilisi, continue to fill the current gaps in medical services in Georgia, and strengthen and expand services in elective care.

In the pharmaceuticals business GHG’s aim is to:

• Achieve a 30%+ market share in 2018, whilst targeting an EBITDA margin to 8.0%+
• Continue to decrease the cost of goods sold/services, by consolidating GHG’s pharmacy and hospital purchases of pharmaceuticals and medical disposables
• Enhance the retail margin by launching private label initiatives, increasing the number of loyalty programme users and expanding sales to hospitals
• Enhance digital channels
In the medical insurance business GHG’s aim is to:

• Reduce the combined ratio to less than 97% over the next few years (currently 102.5%*)
• Improve synergies by seeking to retain the number of claims of more than 70% (currently 59.1%)


* Excluding depreciation and amortisation expenses.
** Addressable market – excluding the revenue from speciality beds.
*** Addressable market – excluding the revenue from dental and aesthetic services.
**** ISSSG, 9M17 annualised.