Understanding Entrepreneurial Opportunity in Kazakhstan

The private-equity-owned company had once been a traditional retail bank, but under Lomtadze’s leadership, it had transformed itself into the country’s most popular online platform, dominating the e-commerce, payments, and fintech sectors at the same time that Kazakhstan’s economy was seeing rapid growth. How would Lomtadze and his leadership team explain this evolution and future potential to investors in London and New York?

Kaspi.kz’s business model is one that is unlikely to have developed elsewhere, says Victoria Ivashina, the Lovett-Learned Professor of Finance and the faculty chair of HBS’s Middle East and North Africa Research Center (MENARC). “In emerging markets—which are hugely underserved and operating under so many constraints—there is a lot of entrepreneurship in sectors such as banking,” she explains. “In the US economy or in Europe, these areas are dominated by traditional players, but that’s not the case in Kazakhstan.”

Introduction to Kazakhstan

Along with Esel Çekin, executive director of the HBS MENARC, Ivashina wrote a case study on Kaspi.kz with the goal of introducing students to both the company and the country where Ivashina herself was born. Kazakhstan is the largest economy in Central Asia, and a quickly changing one; the GDP in the former Soviet republic has grown six-fold since 2002 and the country serves as a transportation link between China and Western Europe. The case is an example of faculty members’ increased interest in conducting research in the region. “These are fascinating markets with big opportunities,” Ivashina says. “For students who come from the United States or Europe, these cases expose them to something new and test their understanding of business issues in a different context.”

Ivashina first taught the “Kaspi.kz IPO” case in her Private Equity Finance class in the fall of 2019. Lomtadze, at the tail end of an international roadshow in preparation for an IPO on the London Stock Exchange, returned to HBS to attend the class discussion along with the Kaspi.kz leadership team, a young group with roots in Kazakhstan, Georgia, Russia, Belarus, and Korea. “In that diversity, the students could immediately see something about the cultural life of Kazakhstan,” Ivashina says.

Case Protagonist

For Lomtadze, being a case protagonist was reminiscent of the challenges of being an HBS student. “The MBA students were asking most of the same questions the investors asked us during the IPO process,” he recalls. The case discussion grappled with when to go to IPO and where to do so, a nitty-gritty view of the process outsiders aren’t always privy to. Lomtadze and the students debated if Kaspi.kz was still a bank, with the majority deciding—as Lomtadze did—that the company was now a technology platform. And the students wondered—as the Kaspi.kz team had—how to sell that vision to investment banks and investors.

Lomtadze provided a twist ending for the case. Kaspi.kz had decided to put the IPO on hold. The company felt that its business model had not been explained properly by its advisors and consequently had been undervalued, and the leadership team believed that they needed more time to execute on the strategy to better prove the value of its mobile app and ecosystem-driven strategy. The students were concerned that the company would suffer from the aborted plans.

Interestingly, about a year after Lomtadze’s class visit, he and his team decided to proceed with the IPO on October 15, 2020. The move proved fruitful—Kaspi.kz was oversubscribed by five times and valued at $6.5 billion.

“At the end, Kaspi.kz London IPO was a success,” observes Ivashina, “but the case illustrates the significant frictions in the financial markets and the constantly evolving challenges and opportunities for innovative business models like Kaspi.kz.”