Restarting Uzbekistan: which companies are going IPO and whether to buy them

On Ma 18 Uzbekistan is putting on the stock exchanges in London (LSE) and Tashkent a national investment fund (UzNIF) with an asset value of about $2.4 billion. The placement could be part of a large-scale privatization and a test of the country's attractiveness to international capital.

The IPO of the Uzbek national fund "will be the first opportunity for international portfolio investors to invest in the country's reforming and rapidly modernizing economy," according to Franklin Templeton Investment Group, which is responsible for preparing for the listing.On the LSE, UzNIF's depositary receipts are being offered to investors at $25 - which the fund says corresponds to a capitalization of $1.95 billion or just over 75% of its net asset valuation. The $300 mln worth of securities - i.e. up to half of the entire offering according to the agreements - will be immediately bought by international investment companies led by Franklin Resources, which is part of Templeton.

The fund holds shares of 13 companies with state participation, in each of which it owns from 25% to 40%. In UzNIF's portfolio, 32.4% are securities of the transportation sector, 19.1% - energy, 15.2% - telecommunications, 14.9% - various services and 13.4% - banks. Along with familiar assets for investors, such as financial institutions or airlines, the package includes, for example, utilities and even a bus fleet.

In such a "daisy chain" there are always a few locomotives that will pull the whole portfolio and for the sake of which you can buy ballast, says Rafael Nagapetyants, senior partner of Movchan's Group. "The final price is determined not by the discount to the notional bus fleet - for it the discount can be considered equal to 99% - but to get a share in the "star company", to which they otherwise will not get access yet."

About 60-70% of the portfolio's value falls on mature assets with predictable cash flows, says Munir Yakubov, founder and CEO of Portfolio Investments. Uzbekistan Airways (25% - about $400m), Uzbekhydroenergo (40% - $391m) and Uztelecom (30% - $371m) form almost half of the fund's NAV (net asset value).

"It is important to take into account that NAV already includes a discount on minority stakes, and accordingly, the placement discount of about 25% is actually imposed on top of the already discounted base," says Zafar Karimov, CEO of Freedom Broker Uzbekistan. - In total, this gives a cumulative discount of 35%+, which looks quite attractive from the point of view of entry for an investor.

The largest asset of the Fund is the national carrier Uzbekistan Airways. Over the past six years, the company has almost doubled its passenger traffic to 6.6 million passengers, and the number of routes has grown to 99 (by this indicator Uzbekistan Airways is ahead of the largest air carrier in Central Asia - Air Astana, which has about 65 routes). One of the ambitious tasks of the Uzbek company is to increase its fleet: according to the management's plan, by 2030 the air fleet will double (currently there are 47 airplanes).

UzbekHydroEnergo is the national operator of hydroelectric power plants in Uzbekistan (HPPs provide up to 12% of the country's electricity). According to the "Uzbekistan 2030" strategy, the country plans to build HPPs with a total capacity of 3.3 GW by 2028(2,200 MW are currently inoperation). Uztelecom is the largest telecom operator in Uzbekistan with the number of subscribers, according to the company, 12 million people and coverage of 96% of the country.The offering prospectus states that investors need to consider the companies' risks: Uzbekistan Airways is sensitive to macroeconomics and transportation demand, and its high share of fixed costs increases the impact of load fluctuations on profitability. Uzbekistan Airways bears capital-intensive and technical risks, including equipment depreciation, unscheduled shutdowns and dependence on natural factors. And Uztelecom provides stable revenues, but requires continuous investment in infrastructure, and outages can have a systemic effect

"The structure of the fund reflects the real state of Uzbekistan's transitional economy to the maximum extent possible. By buying this portfolio, investors are investing not just in an asset, but in the country with all its pros and cons," says Zafar Karimov of Freedom Broker Uzbekistan. International organizations are generally positive about the changes taking place in Uzbekistan's economy. In 2025, it will grow by 7.7%, compared to the 7.4% average for emerging markets and 3.6% for Central Asia. The country's GDP has doubled in the last five years to over $100 billion (this was facilitated by near-record high gold prices), and the authorities hope to double this figure by 2030. Economic growth is fueled by a young population: more than half of Uzbekistan's nearly 38 million residents are under 30 years old.

However, the high economic growth rates are partly explained by the low base effect: according to the IMF, Uzbekistan's GDP per capita in 2025 is only $3.51 thousand - more than in neighboring Kyrgyzstan ($2.75 thousand) and Tajikistan ($1.43 thousand), but much less than, for example, in Kazakhstan ($14.77 thousand).

During the 10 years of Shavkat Mirziyoyev's presidency, the country moved to free conversion and "floating exchange rate" of the sum, investors were given the right to freely withdraw their profits abroad. The mandatory sale of foreign currency earnings was abolished, and VAT was reduced from 20% to 12%. The state is reducing its participation in the economy: over the past four years, more than five hundred state-owned enterprises have been privatized, some have been closed, some have been put on the local stock exchange. In 2018, the country received a BB- sovereign credit rating from S&P for the first time, and it was upgraded to BB in November 2025.

The IMF notes as a positive factor the ongoing reforms, stable investment activity in the country, and high gold prices, which, according to the National Statistics Committee, accounted for 29.3% of the country's annual exports. However, World Bank and IMF experts emphasize risks: dependence on fuel prices (Uzbekistan is a net importer), the possibility of failure in the fight against inflation and the slowdown of institutional reforms. Bloomberg wrote that the main risk for investors is that the current success largely depends on President Shavkat Mirziyoyev.

The listing of UzNIF on the stock exchange is only part of Mirziyoyev's plans to accelerate privatization in order to attract foreign capital. The Uzbek authorities have stated their intention to bring the shares of more than a dozen state-owned companies to the international and domestic market in 2025-2028.The main asset on this list is a stake in Navoi Mining and Metallurgical Combine (NGMK), the world's fourth-largest gold producer, with an estimated valuation of up to $20 billion. The company is of strategic importance to Uzbekistan, with this metal accounting for about 80% of its international reserves.

In the spring of 2024, Shavkat Mirziyoyev issued a decree stating that 5% of state-owned shares of NGMK should be offered to investors no later than the end of 2025. However, this decree has not yet been implemented.

"Navoi is the jewel of Uzbekistan - both strategically and politically - so it's likely to be saved for later when market depth and valuation transparency improve," Luis Saenz, a partner at investment firm Roemer Capital, told Bloomberg, noting that UzNIF is better suited for a test offering.

This is not the first time Uzbekistan has invited foreign investors to invest in its enterprises. However, during the presidency of Islam Karimov, large investments often ended badly. In the 2000s, many companies with foreign participation were charged for non-payment of taxes for previous years, or had previously granted exemptions reconsidered.

For example, Newmont Mining, the second largest gold mining company in the world, entered into a joint venture (JV) with Navoi MMC in 1992, investing $225 million, but in 2006 it was declared bankrupt, and after lengthy courts the Americans were able to recover only $80 million. The list of companies that left the country with losses and sometimes with criminal cases is quite long: Oxus Gold (estimated losses of $400 million), General Motors, TeliaSonera, Oriflame, Carlsberg, Russian MTS, Vimpelcom, Faberlic.

However, Rafael Nagapetyan, senior partner at Movchan's Group, believes there is no need to worry about the scandals of the past years. "The climate in Uzbekistan is changing: private companies are being allowed to grow, not taken away, their owners are not imprisoned, and even unicorn companies have appeared. A new generation of managers with a different approach has grown up in the country, and investors are also reading this," he says.

Reputation is not restored overnight, Freedom Broker Uzbekistan CEO Zafar Karimov agrees: "technically" investors cannot rule out that the mood of the country's leadership may change again. "But future investors have a risk declaration and there is such a guarantor as Templeton. Any significant deviation from the declared conditions could have a negative impact on investors' perception of the country, so the logic of reforms is more important than short-term fluctuations," Karimov said.

This article was AI-translated and verified by a human editor