Uzbek State Fund Rises in London Debut After $604 Million IPO

Uzbekistan’s national investment fund rose in its London trading debut, after the government sold a $604 million stake.

The London-listed global depositary receipts opened at $26, after the Ministry of Economy and Finance sold 23.4 million units at a fixed price of $25 apiece, according to a statement on Wednesday. In total, the ministry sold a 31% stake in the fund, known as UzNIF, in both London and Tashkent, valuing it at $1.95 billion.

Managed by a unit of Franklin Templeton, UzNIF holds stakes of between 25% and 40% in 13 companies across utilities, energy production, telecommunications, banking and transportation. The largest holding is Uzbekistan Airways, which carried about 6.6 million passengers last year. Many of the fund’s portfolio companies, including the airline, are also slated for their own IPOs in the coming years.

The IPO is part of Uzbekistan’s plan to move toward a more market-led economy. About 3% of the deal was allocated to the Tashkent offering, where the primary listing is held. Shares were sold in Tashkent at 4.65 soum each and a 5% discount was offered to retail investors, according to Wednesday statement.

BlackRock, Franklin Resources, Redwheel, and the Allan & Gill Gray Foundation acted as cornerstone investors, agreeing to buy about $300 million of UzNIF’s GDRs.

“Front-loaded risks could weigh on the near-term performance,” analysts at Römer Capital led by Alex Kantarovich wrote in a note dated May 7, citing similar vehicles trading at a discount.

“The best way to play it in our view is to sit out the IPO and pick up in the secondary market at a better entry point and hold for the long run,” the analysts wrote. The investment company calculated a total fair value for the fund of $2.7 billion, but expected it to trade at a NAV of $2.03 billion or $26 per GDR.