A profile on Kaspi.kz - a bank turned technology company that IPO’d in London last month raising over $1 billion and becoming the largest listing out of Central Asia
Thanks for the write-up! The business fundamentals here definitely look impressive. Just one thing you haven't touched upon - the corporate governance - how would you recommend more quality-focused, long-term investors follow this regard in the cases of under-followed emerging markets like Kazakhstan?
Hi Steven, not an expert but think couple of things could be used as an indicator on some level, for example, a listing on a major global stock exchange that has higher governance reqs, board and shareholder composition (Goldman bought a stake at Kaspi, not sure if they are still holding it, but they prob did their due dil), types of creditors for long term financings, etc. Overall of course these things are on the spectrum, and sometimes it is difficult to assess.
Hi Steven, not an expert but think couple of things could be used as an indicator on some level, for example, a listing on a major global stock exchange that has higher governance reqs, board and shareholder composition (Goldman bought a stake at Kaspi, not sure if they are still holding it, but they prob did their due dil), types of creditors for long term financings, etc. Overall of course these things are on the spectrum, and sometimes it is difficult to assess.
A few thoughts on developing services in-house, though.
1. Sure, long term being an aggregator is the most capital efficient model, but
2. Doesn't an aspiring aggregator need some critical mass to be able so onboard new partners? I mean, if I would start a new aggregation platform, why would anybody want to sign up (on my terms)? Just look at how Tencent, Gojek etc. and even the iOS/Android app stores started out. They had their own services and only over time added lots of third party services.
3. And finally, while relatively costly, the ability to create services in-house could a tool to force other service providers onto Kaspi's platform at lucrative terms. Kaspi can simply threaten them to replicate their business or acquire their closest competitor and integrate them into the platform. Once Kaspi has demonstrated its power, it will be much easier to demand high commissions from third party service providers. At the same time Kaspi will be able to reduce its capital intensity which should benefit scalability. I am curious to see how things will evolve around their acquisitions and expansion into Azerbaijan.
In essence, owning the business end-to-end (for now) could be another strategic long-term play.
Hi Philip, thank you so much for the thoughtful comment. I totally agree with you - building an aggregator is a chicken and egg problem. Both sides needs each other, and both sides need scaling. With Kaspi though i do think it has reached a critical mass in KZ - no1 bank, payments and e-commerce platform by a mile (I’ve recently been in KZ and its penetration is astounding). But at the same time it has missed out on other key super app propositions like ride hailing, food and grocery delivery for example. There are now other independent market leaders in those segments. Other finance spaces are also developing faster outside of Kaspi’s ecosystem (stock trading). So all in all, super impressive execution and enormous payback, but feels like they could have captured more by partnering. Yes, expansion to AZ will be super interesting to follow.
I am willing to give the management the benefit of the doubt that they were busy chasing other strategic goals and will open up their platform eventually (hopefully in the not too distant future). There is no doubt that they know about the issues we are discussing here.
Anyways, Kaspi is impressive in its current state, so the potential shift in its execution feels like more upside - provided they don't miss the opportunity.
Very thorough analysis written the way it is easy to follow and comprehend. Structured, presented excellent with good pictures inserts. Excellent reading!
Insightful and simple read, Aika, well done! Just subscribed to your blog
Very nice
Great job! Very interesting
Thanks for the write-up! The business fundamentals here definitely look impressive. Just one thing you haven't touched upon - the corporate governance - how would you recommend more quality-focused, long-term investors follow this regard in the cases of under-followed emerging markets like Kazakhstan?
Hi Steven, not an expert but think couple of things could be used as an indicator on some level, for example, a listing on a major global stock exchange that has higher governance reqs, board and shareholder composition (Goldman bought a stake at Kaspi, not sure if they are still holding it, but they prob did their due dil), types of creditors for long term financings, etc. Overall of course these things are on the spectrum, and sometimes it is difficult to assess.
Hi Steven, not an expert but think couple of things could be used as an indicator on some level, for example, a listing on a major global stock exchange that has higher governance reqs, board and shareholder composition (Goldman bought a stake at Kaspi, not sure if they are still holding it, but they prob did their due dil), types of creditors for long term financings, etc. Overall of course these things are on the spectrum, and sometimes it is difficult to assess.
Great article, thanks.
A few thoughts on developing services in-house, though.
1. Sure, long term being an aggregator is the most capital efficient model, but
2. Doesn't an aspiring aggregator need some critical mass to be able so onboard new partners? I mean, if I would start a new aggregation platform, why would anybody want to sign up (on my terms)? Just look at how Tencent, Gojek etc. and even the iOS/Android app stores started out. They had their own services and only over time added lots of third party services.
3. And finally, while relatively costly, the ability to create services in-house could a tool to force other service providers onto Kaspi's platform at lucrative terms. Kaspi can simply threaten them to replicate their business or acquire their closest competitor and integrate them into the platform. Once Kaspi has demonstrated its power, it will be much easier to demand high commissions from third party service providers. At the same time Kaspi will be able to reduce its capital intensity which should benefit scalability. I am curious to see how things will evolve around their acquisitions and expansion into Azerbaijan.
In essence, owning the business end-to-end (for now) could be another strategic long-term play.
Hi Philip, thank you so much for the thoughtful comment. I totally agree with you - building an aggregator is a chicken and egg problem. Both sides needs each other, and both sides need scaling. With Kaspi though i do think it has reached a critical mass in KZ - no1 bank, payments and e-commerce platform by a mile (I’ve recently been in KZ and its penetration is astounding). But at the same time it has missed out on other key super app propositions like ride hailing, food and grocery delivery for example. There are now other independent market leaders in those segments. Other finance spaces are also developing faster outside of Kaspi’s ecosystem (stock trading). So all in all, super impressive execution and enormous payback, but feels like they could have captured more by partnering. Yes, expansion to AZ will be super interesting to follow.
I am willing to give the management the benefit of the doubt that they were busy chasing other strategic goals and will open up their platform eventually (hopefully in the not too distant future). There is no doubt that they know about the issues we are discussing here.
Anyways, Kaspi is impressive in its current state, so the potential shift in its execution feels like more upside - provided they don't miss the opportunity.
Very thorough analysis written the way it is easy to follow and comprehend. Structured, presented excellent with good pictures inserts. Excellent reading!
Thank you! Means a lot!