"Even though this loan facility was never used, it was important to have it in place at a time of crisis"
Among those Kazakh companies that have received private equity funding, there is a recognition that the benefits extend far beyond the initial capital commitment they receive. Mikhail Lomtadze, chairman of Kaspi Bank, a leading player in the retail segment of the Kazakh banking market, says that its private equity backer, Russia/CIS specialist Baring Vostok Capital Partners, which acquired a 51% stake in the bank in 2006 (when it was known as Bank Caspian), has played a big role in its strategic development and been instrumental in helping it source management talent and additional funding to grow its business.
Lomtadze says that when the Kazakh banking sector was hit by the fallout from the global credit crunch in 2007, Baring Vostok reacted promptly and provided the bank with a $100 million loan facility to help it cope with any problems. "Even though this loan facility was never used, it was important to have it in place at a time of crisis."
He adds that Baring Vostoks longstanding relationships with international financial institutions such as the European Bank for Reconstruction and Development, and the International Finance Corporation enabled Kaspi Bank to raise around $200 million of long-term financing in 2008/09 that enabled it to expand the scope of its operations at a time when many of its rivals were having to scale back their activities. Lomtadze says now that the overseas debt markets are reopening for Kazakh lenders, the fact that Kaspi Bank has a financially strong and well-known backer such as Baring Vostok "will help to create additional value for us should we decide to tap the international capital markets for funding".
Lomtadze says that while the onset of the global credit crunch had a big impact on the short-term growth prospects of the Kazakh banking sector, as a long-term investor Baring Vostok has enabled Kaspi Bank to concentrate on developing its franchise in Kazakhstan rather than looking for an early exit. Furthermore, he says that Baring Vostok is supportive of a plan for Kaspi Bank to export its business model from Kazakhstan into other parts of Central Asia in the coming years.
Heyday for private equity in Kazakhstan still lies ahead