Case study: Korzinka

Uzbekistan has undertaken significant economic reforms in recent years, such as liberalising the currency and customs regulations, reforming the tax system and introducing VAT. This has had a positive impact on the overall business and investment climate.

Yet in an environment where investors’ appetite for private companies in Uzbekistan remained low, the EBRD saw an opportunity to capitalise on the under-penetrated grocery retail market in a country where two-thirds of the 35 million-strong population is under 30 years old.

So with this low penetration, favourable demographics, a positive investment climate and a strong urbanisation trend, first-movers had a great opportunity for early access to the growth curve. Add to this Korzinka’s leading market position and its talented management team, it was an attractive investment for the EBRD.

The EBRD started working with Korzinka around 18 months before actually making an equity investment; the Bank needed to identify key areas in which it could create value and prepare the company for institutional capital. An extremely volatile investment climate and market conditions made it quite challenging for the EBRD to assess the company’s true operating performance and the process required significantly more resources and time. Initial efforts focused on introducing an annual financial audit and international financial and management reporting standards, understanding the core store formats and assessing Korzinka’s long-term growth potential.

“We are proud to support Korzinka,” commented Tamas Nagy, Co-Head of the EBRD’s Private Equity team. “It is the Bank’s first equity investment in Uzbekistan. It was very intense and collaborative work, which allowed us to build our relationship on trust and form a shared vision of the potential and strategic initiatives required to ensure the company’s sustainable and profitable long-term growth.”   

Once the investment was made, the EBRD, along with Kozinka’s management team, began setting the business on the path to long-term growth. The Bank took a hands-on approach and appointed to the supervisory board independent board members with vast sector expertise. It also drove the company’s efforts to recruit several senior team members for the operations, logistics and finance functions. The Bank saw its role as bringing in the necessary resources and international expertise to the business, improving corporate governance standards but letting the management retain control over the way it ran the business.

The EBRD investment is helping the retail chain to expand its network from 47 stores in 2019 to over 120 stores in 2023, including to regions where more than 50 per cent of the population lives outside of large metropolitan areas. In order to scale up profitably, store formats and locations need to be optimised and logistics, procurement and working capital management improved.

A portion of the investment is being used to enhance IT infrastructure and management information systems to enable Korzinka to improve management reporting and decision-making and create more efficient internal operations.

Aside from strengthening the company’s competitive position, increasing its profitability beyond prevailing standards in Uzbekistan and improving governance standards, the investment will support the EBRD's Green Economy Transition Approach. This initiative promotes the environmental benefits and mitigation of climate change effects. The resource-efficient technologies that will be installed in retail outlets over the course of the investment will save at least 140,700 GJ of energy and 33,000 tonnes of CO2 each year, contributing to a greener retail sector in Uzbekistan.