You didn’t know Kazakhstan, a basically landlocked country (it borders the Caspian Sea, which is landlocked), in the middle of Central Asia had a fintech company like this one.
But they do. It’s called Kaspi.kz (KSPI). They listed on the London Stock Exchange on Thursday. It was, being considered a tech company now and not just a bank, totally oversubscribed. Kaspi brought in over $1 billion.
The stock opened at $38 per share and traded as high as $46.90 with volume of more than 4.4 million shares. That’s more than Russia’s Yandex trading volume, which averages 3.8 million per day. The IPO gives Kaspi a market cap of $6.5 billion as of today. It was the second largest IPO of the year and the fourth largest in all of Europe.
And it came from Kazakhstan, a country better known by the masses for being the home to fictional character Borat, then the most promising country in Central Asia, if not all of the large former Soviet states, including Ukraine.
Kaspi set its IPO price at $33.75 on 25,764,894 shares, equal to a total offering size of approximately $870 million and representing 13.4% of the company’s issued share capital. Another 3,864,736 shares are being made available by certain shareholders pursuant to the over-allotment option, which, if exercised in full, would increase the number of Global Depositary Receipt (same as an ADR here) in public hands to 29,629,630 shares in total or approximately 15.4% of the company’s issued capital.
Kaspi is following a trend taking place in Russia investing circles recently, with Sberbank going more digital and heavy into fintech. And Yandex saying it is considering a bid to buy online banking company Tinkoff in a deal valued at $5 billion. For Russia, that’s huge.
Kaspi for Kazakhstan, is the same.
This is the country’s first new tech leader. Investors have mostly been waiting for state owned firms there to sell shares in airlines and telecos and energy companies. That’s old world stuff. Kazakhstan just leapt into 2020 with Kaspi.
The IPO was first suggested by Russian private equity firm Baring Vostok, a long time shareholder in Kaspi.
With IPO proceeds of nearly $1 billion, Kaspi is right up there with Russia’s state-controlled shipping giant Sovcomflot which went public in Moscow on October. 7, online retailer The Hut Group and e-commerce group Allegro as the biggest listings from Moscow to London in 2020.
Kaspi was first planning to list last year, but pulled the plug on it in October due to unfavorable market conditions, Mikheil Lomtadze, chairman of Kaspi.kz told Reuters at the time.
Lomtadze said in an email that today’s launch was “a strong validation of our future growth prospects (and) will allow some of the world’s largest investors to join us as we continue to play a leading role in Kazakhstan’s rapidly evolving digital transformation.”
Kaspi owns the Super App, the country’s most popular mobile app and the foundation for everything they do for both retail and business customers, including banking and e-commerce. The company says it has over 7.8 million monthly active users.
On the e-commerce side, Kaspi is the biggest in Kazakhstan by sales value as of 2019, with an e-commerce gross merchandise value (GMV) share of 46% of the market. Their GMV value for all of Kazakhstan retail was 5.5% last year.
It operates primarily in Kazakhstan. But its market is not limited to that. Central Asia has a total population of around 74 million people. Most do not have access to banking services and about 55.2% of the region’s population live in rural areas where financial inclusion is limited; a boon for fintech in general, according to a report by Astana International Financial Center titled “The State of Fintech in Central Asia: How Kazakhstan Drives the Regional Fintech Industry”, published in June. The report did not mention Kaspi, however.
Andrey Mikhailov, a senior analyst at Sova Capital, said fintech banking apps have been developing rapidly since 2010, led by Russia. Lomtadze is actually Georgian. He has his MBA from Harvard Business School and spent many years at Baring Vostok, founded by American investor Michael Calvey in Moscow.
Mikhailov said the current explosion of investor and consumer interest “specifically in online brokerage is driven by the combination of pandemic lockdowns and low interest rates.”
There’s more of this to come, though probably not out of Kazakhstan just yet.
Ozon, the “Russian Amazon” rumored to be considering a listing in the U.S. and perhaps before year’s end, has been making strides into fintech with its Ozon.Invest lending platform for merchants and Ozon.Card, a cashback and loyalty product.
For emerging market investors looking for something cheaper than the Nasdaq
Baring Vostok is the most well known fintech hunters in the region.
For the last year and a half, the investment firm has been more famous for its partners like Calvey getting arrested and placed under house arrest over what most people in the market say are bogus charges stemming from a commercial dispute with their partners in Vostochny Bank, located in Russia’s far east.
“Baring Vostok has one of the strongest track records of investors in technology and fintech companies in Russia and Eurasia. In almost all cases the Baring Vostok contribution has been an acknowledged factor in the growth and development of the business and, in many instances, the realization of value for itself and other shareholders through a public listed or strategic sale,” says Chris Weafer, CEO of Macro Advisory. Vostochny Bank was part of that strategy, but that has since stalled out due to the continued shareholder dispute. Vostochny could have “followed the route now taken by Kaspi Bank,” Weafer says.
Kaspi, founded in 2002, was a basic, run-of-the-mill bank, catering to a mix of corporations and small to midsized companies looking for loans.
Baring Vostok acquired a majority stake in the bank in December 2006, and Lomtadze became CEO in 2007. That changed everything. Lomtadze told Euromoney magazine in January, that he “basically fired everybody”. Vostok rebuilt the management team from scratch.
“We had a very clear goal to build our competitive advantage on speed of providing products and services, and constant disruption through innovation,” he said in the January interview covered in Euromoney. “You can achieve this only by being data-driven and technologically advanced. We felt that would be our biggest source of competitive advantage in the years to come.”