Tashkent, Uzbekistan (UzDaily.com) — International credit rating agency Fitch Ratings has assigned Uzum Holding Ltd. a Long-Term Issuer Default Rating (IDR) of ‘B’. The rating outlook is set as “Positive”.

The rating reflects the consolidated credit profile of the Uzum group, which exercises full operational control over all its subsidiaries, including Kapitalbank JSC, which itself holds a ‘B’ rating with a Positive outlook.

The holding's financial stability is supported by prudent liquidity management, with Kapitalbank continuing to serve as a key funding source through intra-group loans and dividend flows. An increase in debt financing at the holding level is expected going forward.

Uzum holds a leading position in Uzbekistan’s fintech and e-commerce markets. In a country of around 38 million people, the company serves over 16 million monthly users. Uzum has developed a nationwide e-commerce infrastructure and offers financial solutions, including BNPL (Buy Now, Pay Later) loans, which help monetize its e-commerce operations.

The Positive outlook reflects an improving operating environment for financial institutions in Uzbekistan and strong growth prospects for Uzum in a still underpenetrated market. While Uzum is legally registered in Abu Dhabi (rated AA/Stable), all of its operational assets are located in Uzbekistan (rated BB/Stable).

Fitch notes several constraining factors, including the company’s rapid growth, the lack of stress-testing of its business model during economic downturns, and risks associated with its BNPL lending activities. A potential Eurobond issuance could introduce foreign exchange risk in the absence of hedging mechanisms.

Nevertheless, the company’s resilience is underpinned by positive cash flows, high profitability (net interest margin of 11%, and return on assets before tax at 4.5% in 2024), and a short-term, diversified portfolio mostly denominated in the national currency.

Kapitalbank JSC remains Uzum’s largest asset, holding approximately a 6% share of the banking sector by issued loans. The bank demonstrates strong profitability, driven by growth in auto lending and services to small and medium enterprises. However, the share of non-performing loans reached 4.5% by the end of 2024.

These risks are mitigated by collateral coverage and portfolio diversification. While the bank’s internal group resources have limited substitutability, the overall level of external debt remains moderate.

Outside of Kapitalbank, Uzum issues short-term loans in Uzbek soums, primarily to e-commerce clients through BNPL and credit lines. In 2024, the cost of risk stood at 3% of the average gross loan volume. Fitch expects this figure to increase moderately.

Gross debt-to-tangible equity improved to 6.7x at the end of 2024 from 10.1x the previous year, supported by strong internal capital generation (33%). The company does not pay dividends. The level of unsecured non-performing loans reached 11% of tangible equity, indicating sustained capitalization strength.

The group's funding is primarily sourced from local-currency deposits in Kapitalbank and the issuance of domestic bonds. Uzum plans to issue Eurobonds to extend the maturity profile of its borrowings.

As of the end of 2024, Kapitalbank’s liquid assets covered 35% of client deposits, with a loan-to-deposit ratio of 87%.

Fitch notes that capital and liquidity resources within the group are not interchangeable, necessitating effective liquidity management at the holding level.

Factors that could affect the rating include a revision of the outlook to “Stable” in the event of profitability deterioration or an increase in debt burden, particularly if the double leverage ratio approaches or exceeds 120%.

A downgrade of Kapitalbank’s rating could also impact Uzum’s rating. Additional risks include a decline in asset quality and regulatory changes affecting BNPL or other fintech products that could hinder the company’s growth.