Former CEO of VK and founder of KupiKupon are going to set up a holding company in the IT sector in Uzbekistan

Former CEO of VK and founder of KupiKupon are going to set up a holding company in the IT sector in Uzbekistan

Boris Dobrodeyev, who headed VK from 2016 to 2021 (until the fall of 2021 - Mail.ru Group), and co-founder of the Russian company KupiKupon Jasur Dzhumaev told RBC about plans to create an IT holding in Uzbekistan called Uzum together with local entrepreneurs. In return for a stake in the holding, Dobrodeyev became a consultant to Uzum.

The holding now includes AKB Kapitalbank, marketplace Uzum Market, installment service Uzum Nasiya, and digital bank Uzum Bank (formerly a subsidiary of Kapitalbank, Apelsin Bank). Delivery of prepared foods and products from stores and restaurants will be launched in the near future. The company plans to combine the business models of Russian services Delivery Club and Ozon fresh, Dobrodeyev and Dzhumaev explain. To this end, a network of dark stores will be set up across the country, but Uzum is not disclosing any details. As the partners consider this model unprofitable, the delivery of prepared meals is not considered.

In Uzbek, Uzum means grapes. As the representative of the company explained, this name was chosen because "grapes are one of the traditional cultures for Uzbekistan, it is an understandable and close image for Uzbeks". "And obviously there is a nice analogy here: the ecosystem, like a bunch of grapes, brings together a variety of services," he said.

After leaving VK in early 2022, Dobrodeyev headed USM Telecom (part of Alisher Usmanov's USM Holding, which controls Megafon, among other companies, and was VK's largest shareholder until December 2021), but left the post in May. As Dobrodeyev told Forbes at the time, he wanted to focus on his own projects, in particular setting up an investment company and investing in fintech and e-commerce assets in the CIS, primarily in Kazakhstan and Uzbekistan. He said he would invest tens of millions of dollars of his own savings in this company and then attract additional investment from international investors. Asked by RBC if those plans were still relevant today, Dobrodeyev explained that as a co-founder and advisor to Uzum, he could not create other investment companies focused on the same lines of business because "it would be a direct conflict of interest." At the same time, Uzum itself is planning to focus on the market in Uzbekistan, according to Dobrodeyev.

How Uzum is going to be developed

Dzhumaev said he came up with the idea for Uzum several years ago, but "the time wasn't right" because the penetration of mobile applications in Uzbekistan was relatively low. According to him, this project aims to create country’s largest e-commerce ecosystem.

Dzhumaev said: "The main legal entity of the holding is registered in the United Arab Emirates. The company's shareholders and how the shares are distributed are not disclosed, "due to partly the fundraising stage," according to the company. After that, the Uzbek businessmen will keep the majority of the shares in the company, Dzhumaev said. Now, Uzum is in negotiations with "large international investment funds from the Middle East," he says. "By the end of 2023, our fundraising target is approximately $300 million. These funds themselves were interested in the asset, they liked what we're doing," Dzhumaev said. In the next three years, Uzum may conduct an initial public offering (IPO) on one or more international stock exchanges, which has not yet been decided.

The partners would not disclose the amount of investment they have already had in the creation of Uzum. According to Dzhumaev, he has invested, inter alia, from the sale of its IT assets in Russia, without specification of details. According to SPARK, Dzhumaev owned 50% of Algorithm, which was developing mobile marketing solutions. This company was acquired by MegaFon at the end of 2022. It was agreed not to disclose the amount of the transaction. Dzhumaev also owns 100% of Round Bank and has founded Quantum A (which provides telecom and mobile services to operators). 

In addition, to buy out Kapitalbank's stake and launch the marketplace, the partners raised money from Uzbek entrepreneurs - "several tens of millions of dollars," Dzhumaev said. These investors were given a share in the capital of the Uzum company, he explained. Part of the Kapitalbank's profits are also directed to the development of e-commerce by the holding company.

The official launch date for the Uzum Market was mid-2022. Since then, the number of cities where the marketplace operates has grown to 16, and its own 27,000-square-meter warehouse has been built, said Akmal Rakhimov, deputy general director of the marketplace.

The acquisition of Kapitalbank took place at the same time. At the end of 2022, the Uzbek media wrote that 50% of the authorized capital of the bank was purchased by Finance TCI on the stock market for 786.89 billion soums (4.6 billion rubles at the average exchange rate in December). This company owned 8.33% of Kapitalbank before the start of a special military operation in Ukraine. Finance TCI is affiliated with Telecominvest (part of Alisher Usmanov's USM), the Spot portal reported. In the fall of 2021, the latter became a shareholder of Kapitalbank. However, in March 2022, representatives of Kapitalbank stated that USM had sold 100% of Telecominvest and Finance TCI to "a group of private investors". According to the media, former USM top manager Irina Lupicheva and Boris Dobrodeyev owned an equal stake in Finance TCI as of March 14, 2022.

According to the Central Bank of Uzbekistan, Kapitalbank was the largest private bank in the country by assets as of February 1, 2023, which amounted to 29.2 trillion soums ($2.5 billion at current exchange rates), or 5.2% of the total assets of banks in Uzbekistan. Uzbekistan has 32 credit institutions, 11 of which are state-owned. Kapitalbank ranks seventh among all banks in terms of asset size, ahead of some state-owned banks. The equity capital of the bank amounts to 2.8 trillion soums ($ 246.7 million).

Mikhail Burmistrov, head of the INFOLine-Analytics agency, suggested that from the beginning of 2023, investments in the Uzum Market could reach up to $100 million, without taking into account the integration of the bank. It was estimated at $50-100 million by another respondent in the e-commerce market.

By the end of the year, Uzum expects that the marketplace will have a gross merchandise value (GMV) of $150 million. In response to a question about when the marketplace plans to break even, Dzhumaev said that such a goal is not currently in sight. "We spend all our money creating infrastructure and logistics at the development stage. It is important for us to gain the maximum market share and to pass the stage of the final formation of the offline market in Uzbekistan directly to the online trade," he explained.

Earlier, several sources in the Russian IT market said that part of the team of VK and AliExpress Russia (a marketplace within VK) had joined Dobrodeyev's new project in Uzbekistan. Uzum representatives confirmed this information, noting that former employees of several other Russian companies - Ozon, Yandex, Delivery Club and others - had also joined. According to Dzhumaev, the team has over 5,000 employees, including about 500 developers. About 80% of developers are IT professionals from Uzbekistan. The company plans to hire more than 2,000 employees by the end of the year. In addition, Uzum is planning to open its own academy for developers.

What are the prospects for the holding company?

Dzhumaev believes that Uzum has no serious e-commerce competitors in Uzbekistan, as its team "understands the specifics of the local market better than anyone else.

According to INFOLine-Analytics, the penetration of online sales in retail sales in Uzbekistan will approach 3% in 2022, and the capacity of this market will exceed $1 billion (including C2C commerce). Fedor Virin, a partner at Data Insight, estimates that online commerce in Uzbekistan accounts for a fraction of a percent of the total retail market. A year ago, there were no major players in the e-commerce space, and the fastest growing segment was the delivery of food from restaurants, he adds. "The recent emergence of Uzum and Zoodmall (a Middle Eastern marketplace) are capable of significantly increasing the market volume, because the key problem in Uzbekistan is the complete lack of e-commerce infrastructure and the habit of consumers to buy online," Virin talks. In his opinion, the e-commerce market in Uzbekistan today is similar to the state of the Russian market at the beginning of the 2010s. Virin notes that Yandex has a strong position in the delivery of ready-made food.

Mikhail Burmistrov, head of INFOLine Analytics, predicts that e-commerce in Uzbekistan will grow by "at least 50% per year for the next four to five years," based on Internet and mobile penetration rates. In addition to Zoodmall and Uzum Market, he cited Russian Wildberries, China's AliExpress, Kazakhstan's Kaspi, and OLX Classifieds of the Netherlands as major players in this market. He believes Uzum will need to invest about $200 million over the next three years to reach the top positions.